Trump Orders Buy America Rules Applied to Federal Loans and Insurance

February 2, 2019

Yesterday, President Trump signed a new executive order that orders federal agencies to expand Buy America requirements beyond what is currently required by law and apply such rules to all “federal financial assistance,” including recipients of federal loans, loan guarantees, and insurance. It also expands Buy America’s reach to domestically produced aluminum (the laws focus on iron and steel).

In his remarks at the signing, the President said “We want American roads, bridges, and railways, and everything else to be built with American iron, American steel, American concrete, and American hands.”

Current Buy America laws are a bit of a mishmash – there are different BA laws for highway grants, transit grants, airport grants, and Amtrak grants, and each set of rules is a bit different from the others. (See this comprehensive ETW article from January 2017 on the status of current Buy America laws and how they got enacted.) At present, there are no BA laws applying to federal loan programs, or to airport projects financed with passenger facility charges. (But former Transportation Secretary Ray LaHood did reject a RRIF loan application from the XpressWest project in 2013 and one of the reasons he cited was Buy America. His letter said “The FRA expects recipients of RRIF loans to purchase steel, iron, and other manufactured goods produced in the United States for their projects, regardless of whether the rolling stock is separately financed.”)

White House trade advisor Peter Navarro explained the need for the new order in an op-ed yesterday, stating that “in the 2016 fiscal year, of the 265 listings in the Catalog of Federal Domestic Assistance for infrastructure or construction projects, more than 200 did not require Buy American considerations. These projects across 14 different agencies added up to over $45 billion of expenditures.”

Trump made “Buy American, Hire American” a campaign slogan in 2016, and in April 2017, he signed an order (Executive Order 13788) declaring that “it shall be the policy of the executive branch to maximize, consistent with law, through terms and conditions of Federal financial assistance awards and Federal procurements, the use of goods, products, and materials produced in the United States.”

However, EO 13788 also defined “Buy American laws” as “all statutes, regulations, rules, and Executive Orders relating to Federal procurement or Federal grants—including those that refer to ‘Buy America’ or ‘Buy American’—that require, or provide a preference for, the purchase or acquisition of goods, products, or materials produced in the United States, including iron, steel, and manufactured goods.”

Yesterday’s new order amends EO 13788 by striking “Federal grants” from that definition and replacing it with “Federal financial assistance,” which is defined elsewhere in the order as using this definition from OMB which includes loans, loan guarantees, interest subsidies, and insurance.

The heart of the new order is section 3, which directs that within 90 days, “the head of each executive department and agency (agency) administering a covered program shall, as appropriate and to the extent consistent with law, encourage recipients of new Federal financial assistance awards pursuant to a covered program to use, to the greatest extent practicable, iron and aluminum as well as steel, cement, and other manufactured products produced in the United States in every contract, subcontract, purchase order, or sub‑award that is chargeable against such Federal financial assistance award.”

“Covered program” is further defined as “any program for which a focus of the statutory authorities under which it is administered is the award of Federal financial assistance for the alteration, construction, conversion, demolition, extension, improvement, maintenance, reconstruction, rehabilitation, or repair of an infrastructure project in the United States, except that this term shall not include: (i) programs for which providing a domestic preference is inconsistent with law; or (ii) programs providing Federal financial assistance that are subject to comparable domestic preferences.”

And “manufactured products” means “items and construction materials composed in whole or in part of non-ferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber.”

Looking farther down the road, section 4 of the new order says that within 120 days, “the head of each agency administering a covered program shall identify in a report to the President, through the Assistant to the President for Trade and Manufacturing Policy, any tools, techniques, terms, or conditions that have been used or could be used, consistent with law and in furtherance of the policy set forth in section 1 of this order, to maximize the use of iron and aluminum as well as steel, cement, and other manufactured products produced in the United States in contracts, sub-contracts, purchase orders, or sub-awards that are chargeable against Federal financial assistance awards for infrastructure projects.”

For that purpose, “infrastructure project” is defined as “a project to develop public or private physical assets that are designed to provide or support services to the general public in the following sectors:  surface transportation, including roadways, bridges, railroads, and transit; aviation; ports, including navigational channels; water resources projects; energy production, generation, and storage, including from fossil-fuels, renewable, nuclear, and hydroelectric sources; electricity transmission; gas, oil, and propane storage and transmission; electric, oil, natural gas, and propane distribution systems; broadband internet; pipelines; stormwater and sewer infrastructure; drinking water infrastructure; cybersecurity; and any other sector designated through a notice published in the Federal Register by the Federal Permitting Improvement Steering Council.”

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