OMB Issues Final Guidance on “Buy America” Domestic Preference Requirements

INSIGHTi

OMB Issues Final Guidance on “Buy
America” Domestic Preference Requirements
August 24, 2023
On August, 14, 2023, the Office of Management and Budget (OMB) released a pre-publication internet
version of its final guidance on the implementation of the Build America, Buy America (BABA)
provisions contained in the Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58). The IIJA required
OMB to provide guidance to federal agencies on how to apply the “Buy America” domestic preference
requirements to federal financial assistance for infrastructure projects. OMB’s final guidance was
published in the Federal Register on August 23, 2023, and will become effective October 23, 2023.
Background and Overview of Domestic Preference Laws
Federal domestic preference laws seek to support U.S. manufacturing by requiring use of domestically
sourced products in certain situations. The Buy American Act of 1933, the Berry Amendment, and several
other laws require that some goods purchased directly by the federal government be manufactured in the
United States. Separately, several statutes and regulations originating in the 1970s, collectively known as
Buy America, require that states, municipalities, and other recipients of federal awards for transportation
and other types of infrastructure ensure domestic goods are used in their projects. Prior to the IIJA, Buy
America requirements attached to federal funds in the provision of highways, public transportation,
intercity passenger rail (e.g., Amtrak), aviation, and water and sewage construction.
Enacted on November 15, 2021, the IIJA expanded Buy America coverage to other types of infrastructure
projects funded by federal awards, such as electric power transmission facilities and broadband
infrastructure. The law also broadened Buy America product coverage to “construction materials”
including nonferrous metals (e.g., copper used in electric wiring), plastic- and polymer-based products,
glass (including optical fiber), and other materials (e.g., lumber, drywall). To be considered “produced in
the United States” under the IIJA, manufactured goods other than iron and steel must contain greater than
55% domestic content. Some Buy America requirements that existed prior to the IIJA have higher
thresholds. For example, 70% of the cost of public transportation rolling stock must be domestically
produced. Despite these requirements, waivers may be granted in certain circumstances, including (1)
public interest, (2) nonavailability, and (3) unreasonable cost.
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On February 9, 2023, OMB issued proposed guidance to support implementation of various aspects of the
IIJA’s BABA provisions. The final guidance is informed by approximately 2,000 public comments. As
affirmed by the final guidance, BABA’s domestic preference requirements are exclusive to nonfederal
projects that are funded, in part or in whole, with federal awards. BABA requirements do not apply to
direct federal procurement, nor do they overhaul preexisting Buy America regimes.
Selected Elements of the Final Guidance
The final guidance would create a new section in the Code of Federal Regulations (Title 2, Part 184) and
includes the requirements for construction materials, iron and steel products, and manufactured products
to be considered domestic in origin. Although OMB’s final guidance clarifies several issues raised by
public commenters, some issues remain unresolved. Some of the provisions are discussed below.
• Construction Materials. In general, prior domestic preference laws did not address
construction materials. Thus, BABA requirements applicable to such materials are new.
The final guidance updates the list of construction materials to include “engineered
wood” and clarifies that “fiber optic cable” includes “drop cable.” The final guidance also
confirms that “all manufacturing processes” for construction materials must occur in the
United States. OMB’s April 2022 initial guidance specified that at least the final and
immediately preceding manufacturing processes were to occur in the United States. The
final guidance also explains how the “all manufacturing processes” standard should be
satisfied for each individual construction material. For example, for nonferrous metals, all
manufacturing processes—from initial smelting or melting through final shaping,
coating, and assembly—must occur in the United States. For optical fiber, from the initial
preform fabrication stage through the completion of the draw must occur in the United
States. Non-listed construction materials, such as hot mix asphalt or wet concrete brought
to the worksite for incorporation, are not restricted. Precast concrete, however, comprises
components processed into a specific shape or form and is in such state when brought to
the worksite and thus is considered a manufactured product.
• Iron and Steel Products. BABA’s iron and steel requirements apply to products that are
“predominantly” iron and steel. The final guidance states that predominantly means the
cost of the iron and steel exceeds 50% of the total cost of all components. For iron and
steel products, all manufacturing processes—from the initial melting stage through the
application of coatings—must occur in the United States. The guidance also provides
examples of iron or steel products to include “bar, billet, slab, wire, plate, or sheet,
castings, or forgings” used in the manufacture of the finished good.
• Manufactured Products. OMB’s final guidance defines manufactured products as
articles, materials, or supplies that have been “(i) processed into a specific form and
shape; or (ii) combined with other articles, materials, or supplies to create a product with
different properties than the individual articles, materials, or supplies.” For the cost of
components test of manufactured products, the final guidance’s definition closely aligns
with the cost of components definition of the Federal Acquisition Regulation. However,
the final guidance replaces the term contractor with manufacturer and the term end
product with manufactured product.
• Domestic Preference and International Agreements. Some commenters requested that
OMB clarify how BABA requirements interact with U.S. obligations under international
agreements. In its final guidance, OMB indicated that U.S. obligations under
international agreements generally extend only to direct federal procurement and not to
obligations imposed on nonfederal entities (e.g., state and local governments) through

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• conditions on federal awards. OMB, however, reaffirmed in its initial guidance that if “a
recipient is a State that has assumed procurement obligations pursuant to the Government
Procurement Agreement or any other trade agreement, a waiver of a Made in America
condition to ensure compliance with such obligations may be in the public interest.”
OMB’s Made in America Office also issued a fact sheet that discusses how the Trade
Agreements Act of 1979 applies to both direct federal procurement under the Federal
Acquisition Regulation and domestic preferences for federal financial assistance.

Author Information

Christopher D. Watson

Analyst in Industrial Organization and Business




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