```

[Federal Register Volume 90, Number 8 (Tuesday, January 14, 2025)]
[Rules and Regulations]
[Pages 2932-2958]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31350]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

23 CFR Part 635

[Docket No. FHWA-2023-0037]
RIN 2125-AG13

Buy America Requirements for Manufactured Products

AGENCY: Federal Highway Administration (FHWA), U.S. Department of 
Transportation (DOT).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule amends FHWA's Buy America regulation to 
terminate FHWA's general waiver for manufactured products and establish 
Buy America requirements for manufactured products with respect to 
Federal-aid highway projects. The standards for applying Buy America to 
manufactured products are generally consistent with the Office of 
Management and Budget's (OMB) guidance implementing the Build America, 
Buy America Act (BABA) provisions of the Infrastructure Investment and 
Jobs Act (also known as the Bipartisan Infrastructure Law (BIL)).

DATES: This final rule is effective March 17, 2025.

FOR FURTHER INFORMATION CONTACT: For questions about this final rule, 
please contact Mr. Brian Hogge, FHWA Office of Infrastructure, 202-366-
1562, or via email at [email protected]. For legal questions, please 
contact Mr. David Serody, FHWA Office of Chief Counsel, 202-366-4241, 
or via email at [email protected]. Office hours for FHWA are from 
8:00 a.m. to 4:30 p.m., eastern time (E.T.), Monday through Friday, 
except Federal holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access and Filing

    This document, the notice of proposed rulemaking (NPRM), all 
comments received, and all supporting material may be viewed online at 
www.regulations.gov using the docket number listed above. Electronic 
retrieval assistance and guidelines are available on the website. It is 
available 24 hours each day, 365 days each year. An electronic copy of 
this document may also be downloaded from the Office of Federal 
Register's website at www.federalregister.gov and the U.S. Government 
Publishing Office's website at www.GovInfo.gov.

I. Executive Summary

    FHWA is required, by statute, to ensure that all projects funded 
under title 23 of the United States Code (U.S.C.) (Federal-aid 
projects) use only steel, iron, and manufactured products that are 
produced in the United States. 23 U.S.C. 313. FHWA refers to these 
requirements as ``Buy America'' requirements. In other words, FHWA's 
Buy America requirement for manufactured products mandates that all 
such products used on Federal-aid projects must be ``produced in the 
United States.'' 23 U.S.C. 313. The Buy America requirement for 
manufactured products has existed in some form since the enactment of 
the Surface Transportation Assistance Act of 1978 (1978 STAA), Public 
Law 95-599 (1978), with those requirements being modified close to 
their current form by section 165 of the Surface Transportation 
Assistance Act of 1982 (1982 STAA), Public Law 97-424 (1983).
    In 1983, following the passage of the 1982 STAA, FHWA determined 
that it would be in the public interest to waive the Buy America 
requirements for manufactured products, with that waiver known as the 
Manufactured Products General Waiver. See 48 FR 1946 (Jan. 17, 1983); 
48 FR 53099 (Nov. 25, 1983). Under the Manufactured Products General 
Waiver, manufactured products that were permanently incorporated into 
Federal-aid projects did not need to be produced domestically, apart 
from predominantly iron or steel components of manufactured products.
    Through this rule, FHWA is establishing specific dates on which the 
Manufactured Products General Waiver will be terminated and is amending 
its Buy America regulation at 23 CFR 635.410 to establish standards 
regarding Buy America requirements that will apply to manufactured 
products on Federal-aid projects. These standards are substantially 
similar to those established by OMB that apply to manufactured products 
subject to BABA.\1\ This means that to be considered ``produced in the 
United States'' and therefore Buy America-compliant, manufactured 
products must

[[Page 2933]]

be manufactured in the United States (``final assembly requirement'') 
and have greater than 55 percent of the manufactured product's 
components, by cost, be mined, produced, or manufactured in the United 
States (``55 percent requirement'').
---------------------------------------------------------------------------

    \1\ 2 CFR part 184 established in 88 FR 57750 (Aug. 23, 2023) 
and M-24-02 (Oct. 25, 2023).
---------------------------------------------------------------------------

    Under this final rule, a manufactured product is defined as an 
article, material, or supply that has been processed into a specific 
form and shape, or combined with other articles, materials, or supplies 
to create a product with different properties than the individual 
articles, materials, or supplies. If, however, an article, material, or 
supply meets this definition but could also be classified as an iron or 
steel product, excluded material, or other product category as 
specified by law or in 2 CFR part 184, that article, material, or 
supply is not a manufactured product. Further, mixtures of excluded 
materials delivered to a work site without final form for incorporation 
into a project are also not manufactured products. For the purpose of 
this rule, an article, material, or supply is generally only subject to 
one set of requirements. For example, a manufactured product is only 
subject to FHWA's Buy America requirements for manufactured products in 
Sec.  635.410(c), meaning that the product must meet the final assembly 
and 55 percent requirements. An iron or steel product, on the other 
hand, must meet FHWA's existing Buy America requirements for iron and 
steel in Sec.  635.410(b), generally requiring that all manufacturing 
processes, including application of a coating, for these materials must 
occur in the United States. See 23 CFR 635.410(b)(1)(ii).
    Pursuant to Sec.  635.410(c)(2)(i), however, precast concrete 
products that are classified as manufactured products must have their 
predominantly iron or steel components meet FHWA's Buy America 
requirements for iron and steel.\2\ Similarly, pursuant to Sec.  
635.410(c)(2)(ii), the cabinets or other enclosures of intelligent 
transportation systems (ITS) and other electronic hardware systems that 
are installed in the highway right of way or other real property and 
classified as manufactured products must comply with FHWA's Buy America 
requirements for iron and steel if the cabinet or enclosure is 
predominantly iron or steel. These specified manufactured products must 
also comply with FHWA's Buy America requirements for manufactured 
products. However, the predominantly iron or steel components for 
precast concrete and the predominantly iron or steel cabinet or 
enclosure for ITS and other electronic hardware systems will be 
considered for the purpose of the 55 percent content requirement.
---------------------------------------------------------------------------

    \2\ As described in more detail in the discussion of 23 CFR 
635.410(c)(1)(iv) below, while precast concrete may be considered a 
manufactured product, wet concrete delivered to a work site is not a 
manufactured product, as wet concrete is a mixture of excluded 
materials delivered to a work site without final form.
---------------------------------------------------------------------------

    The requirements established in this rule are substantially similar 
to those proposed in the NPRM. 89 FR 17789 (March 12, 2024). FHWA 
notes, however, that the final assembly requirement will become 
effective for Federal-aid projects obligated on or after October 1, 
2025. The Manufactured Products General Waiver will remain in place 
until this date. In addition, unlike the NPRM, the 55 percent 
requirement will subsequently become effective for Federal-aid projects 
obligated on or after October 1, 2026. This means that, to be Buy 
America-compliant, for Federal-aid projects obligated on or after 
October 1, 2026, all manufactured products permanently incorporated 
into the project must both be manufactured in the United States and 
have the cost of the components of the manufactured product that are 
mined, produced, or manufactured in the United States be greater than 
55 percent of the total cost of all components of the manufactured 
product.
    The regulatory impact analysis (RIA) prepared for this final rule 
pursuant to Executive Order (E.O.) 12866, as amended by E.O. 14094, is 
available in the rulemaking docket. The RIA estimates the costs and 
benefits associated with establishing Buy America requirements for 
manufactured products. The RIA discusses anticipated benefits of the 
rule qualitatively, as they could not be quantified. Expected benefits 
include protecting and expanding domestic manufacturing, increasing 
supply chain resiliency, and increasing consistency in applying 
domestic content procurement preferences for manufactured products 
between FHWA and other Federal agencies that are subject to the 
requirements of BABA. Expected costs of this rule relate to increased 
material costs for manufactured products used in Federal-aid highway 
construction projects, project delay, and the administrative costs to 
FHWA and recipients of FHWA financial assistance. FHWA is able to 
quantify only increased material costs and the administrative costs to 
FHWA and recipients of FHWA financial assistance. FHWA estimates the 
increased material costs for manufactured products permanently 
incorporated into Federal-aid projects to range from $41 million to 
$980 million per year. FHWA further estimates an additional $167,000 
per year in increased FHWA administrative costs and an additional $22 
million per year in increased administrative costs to recipients of 
FHWA financial assistance. FHWA estimates the 10-year cost of this rule 
to range from $545 million to $8,466 million at a 2 percent discount, 
with annualized costs of $61 million to $942 million.

II. Background and Regulatory History

A. History of the Manufactured Products General Waiver

    FHWA's Buy America requirements were first established in 1978 by 
section 401 of the 1978 STAA, which imposed a Buy America requirement 
to certain unmanufactured and manufactured articles, materials, and 
supplies. Following enactment of the 1978 STAA, FHWA issued an 
emergency rule to implement the Buy America requirement of section 401; 
that rule temporarily waived the provisions of section 401 to all 
products and materials other than structural steel. See 43 FR 53717 
(Nov. 17, 1978).
    In 1980, following the issuance of that emergency rule, FHWA issued 
an NPRM to establish regulations implementing section 401 of the 1978 
STAA. 45 FR 77455 (Nov. 24, 1980). In that NPRM, FHWA proposed to 
extend the coverage of Buy America requirements to all steel 
construction materials used in highway construction projects, while 
excluding all other materials and products from being subject to Buy 
America. 45 FR 77455. Prior to the 1980 rulemaking being finalized, 
Congress enacted the 1982 STAA, which instituted new Buy America 
requirements that are similar to those that exist today. Section 165(a) 
established Buy America requirements for all steel, cement,\3\ and 
manufactured products used on Federal-aid projects, requiring that they 
be produced in the United States.\4\ In 2005, Congress codified the 
current Buy America requirements for steel, iron, and manufactured 
products at 23 U.S.C. 313, and those Buy America requirements remain in 
effect today.\5\
---------------------------------------------------------------------------

    \3\ The Buy America requirement for cement was eliminated by 
Congress in 1984. See Public Law 98-229.
    \4\ Congress also added a Buy America requirement for iron in 
1991. See Public Law 102-240.
    \5\ See section 1903 of Public Law 109-59.
---------------------------------------------------------------------------

    In late 1983, FHWA issued its final rule implementing section 165 
of the 1982 STAA, creating its current Buy America regulations at 23 
CFR 635.410.\6\

[[Page 2934]]

48 FR 53099 (Nov. 25, 1983). In this rule, FHWA found that a waiver of 
Buy America requirements for manufactured products was in the public 
interest, thereby creating the Manufactured Products General Waiver. 48 
FR 53102. FHWA stated that product manufacturers did not generally 
express approval of applying Buy America requirements to manufactured 
products. Id. at 53101. For those that did, FHWA stated that they were 
primarily opposed to unfair foreign trade practices. Id. Rather than 
apply Buy America requirements for manufactured products to remedy this 
concern, FHWA stated that unfair practices could be instead addressed 
through import laws. Id. at 53102. Further, FHWA determined that it was 
not the intent of Congress in enacting the 1982 STAA for FHWA to apply 
a Buy America requirement to manufactured products; FHWA noted that it 
had consistently waived manufactured products from coverage under Buy 
America laws and Congress did not specifically direct a change in that 
policy by enacting the 1982 STAA. Id. at 53101-02. FHWA thus 
interpreted that to mean that not all manufactured products had to be 
covered by the Buy America requirements of section 165. Id. Finally, 
FHWA stated that materials and products other than steel, cement, 
asphalt, and natural materials comprised a small percent of the highway 
construction program; that other manufactured products were minimally 
used and there would be little economic effect to applying Buy America 
requirements to them; and that it would be difficult and 
administratively burdensome to identify the various materials 
comprising manufactured products and trace their origin. Id. at 53102.
---------------------------------------------------------------------------

    \6\ FHWA's regulations implementing Buy America have also 
remained consistent since 1983, apart from reacting to statutory 
changes by removing a reference to a Buy America requirement for 
cement (49 FR 18820 (May 3, 1984)) when Congress removed that 
requirement and adding a reference to a Buy America requirement for 
iron (58 FR 38973 (July 21, 1993)) after Congress added that 
requirement.
---------------------------------------------------------------------------

B. Build America, Buy America Act

    On November 15, 2021, the President signed the BIL (Pub. L. 117-58) 
into law. The BIL includes BABA, which expands the coverage and 
application of domestic content procurement preferences in Federal 
financial assistance programs for infrastructure. BIL, div. G sections 
70901-70927. Among other requirements, BABA mandates that all iron, 
steel, manufactured products, and construction materials used in 
projects supported by funds made available for a Federal financial 
assistance program for infrastructure be produced in the United States. 
BABA section 70914. The BABA, however, provides that this mandate 
applies to iron, steel, manufactured products, and construction 
materials only to the extent that a domestic content procurement 
preference that meets the requirements of section 70914 does not 
already apply. BABA section 70917(a)-(b). As FHWA has an existing 
statutory Buy America requirement for steel, iron, and manufactured 
products at 23 U.S.C. 313, BABA's savings provision results in FHWA 
applying its existing Buy America requirements under 23 U.S.C. 313 to 
iron, steel, and manufactured products, not the requirements of BABA. 
FHWA does, however, apply BABA's domestic content procurement 
preference to construction materials.
    Under BABA, all manufactured products must be ``produced in the 
United States.'' BABA section 70914. For manufactured products, BABA 
defines ``produced in the United States'' to mean that (1) the 
manufactured product was manufactured in the United States and (2) the 
cost of the components of the manufactured product that are mined, 
produced, or manufactured in the United States is greater than 55 
percent of all components of the manufactured product, unless another 
standard for determining the minimum amount of domestic content of the 
manufactured product has been established under applicable law or 
regulation. BABA section 70912(6)(B).
    The BABA also expresses a general policy preference against general 
applicability waivers like the Manufactured Products General Waiver. 
For example, section 70913(c) of BABA requires Federal Agencies to 
identify ``deficient programs,'' which includes programs subject to 
general applicability waivers. Section 70914(d) of BABA also requires 
Federal Agencies to review existing general applicability waivers by 
publishing in the Federal Register a document that: (i) describes the 
justification for the general applicability waiver; and (ii) requests 
public comments on the need for the waiver. Following consideration of 
comments received, BABA then requires Federal Agencies to publish in 
the Federal Register a determination on whether to continue or 
discontinue the general applicability waiver. BABA section 
70914(d)(2)(B). On March 17, 2023, FHWA initiated the review required 
by section 70914(d) of BABA for the Manufactured Products General 
Waiver, publishing in the Federal Register at 88 FR 16517 a notice and 
request for comments on the waiver (``2023 RFC'').

C. OMB's Guidance on BABA

    On August 23, 2023, at 88 FR 57750, OMB revised its guidance in 
title 2 of the CFR to add a new part 184 that provides additional 
guidance on implementing BABA.\7\ Part 184 includes definitions for key 
terms, including iron or steel products, predominantly of iron or steel 
or a combination of both, manufactured products, component, and 
manufacturer. 2 CFR 184.3. In line with section 70912(6)(B) of BABA, 2 
CFR 184.3 states that a manufactured product is ``produced in the 
United States'' if the product was manufactured in the United States 
and the cost of components of the manufactured product that are mined, 
produced, or manufactured in the United States is greater than 55 
percent of the total cost of all components of the manufactured 
product, unless another standard that meets or exceeds this standard 
has been established under applicable law or regulation for determining 
the minimum amount of domestic content of the manufactured product. 
Part 184 also provides guidance for determining the cost of components 
of manufactured products. Pursuant to 2 CFR 184.5, in determining 
whether the cost of components for manufactured products is greater 
than 55 percent of the total cost of all components, there are two 
standards depending on the origin of the component. For components 
purchased by the manufacturer, the cost of the component is the 
acquisition cost, including transportation costs to the place of 
incorporation into the manufactured product (whether or not such costs 
are paid to a domestic firm) and any applicable duty (whether or not a 
duty-free entry certificate is issued). 2 CFR 184.5(a). For components 
manufactured by the manufacturer, the cost of the component is all 
costs associated with the manufacture of the component, including 
transportation costs described in 2 CFR 184.5(a), plus allocable 
overhead costs, but excluding profit and any costs associated with the 
manufacture of the manufactured product. 2 CFR 184.5(b).
---------------------------------------------------------------------------

    \7\ Throughout this document, references to part 184 refer to 
both the text in 2 CFR part 184 and the preamble published at 88 FR 
57750 in the Federal Register.
---------------------------------------------------------------------------

    Part 184 also states that an article, material, or supply should be 
classified as only either an iron or steel product, manufactured 
product, construction material, or section 70917(c) material, that the 
classification must be made based on the status of the material at the 
time it is brought to the work site for incorporation into an 
infrastructure project, and that the material must meet

[[Page 2935]]

the Buy America standards for only the single category in which it is 
classified. 2 CFR 184.4(e) and (f). Part 184 defines a section 70917(c) 
material as cement and cementitious materials; aggregates such as 
stone, sand, or gravel; or aggregate binding agents or additives. 2 CFR 
184.3. These materials are named section 70917(c) materials in 2 CFR 
part 184 because they are referred to in section 70917(c) of BABA.
    As stated earlier, part 184 does not, by its own terms, apply to 
FHWA's Buy America requirements for steel, iron, and manufactured 
products; it applies only to FHWA's domestic content procurement 
preference for construction materials. 2 CFR 184.2(a). Part 184 does, 
however, apply to all Federal financial assistance programs for 
infrastructure that are administered by Federal agencies that did not 
have a domestic content procurement preference for steel, iron, and 
manufactured products meeting or exceeding BABA's requirements.
    On October 25, 2023, OMB issued memorandum M-24-02, 
``Implementation Guidance on Application of Buy America Preference in 
Federal Financial Assistance Programs for Infrastructure'' (``OMB 
Implementation Guidance'').\8\ Section VI of the Implementation 
Guidance warns against overly broad waivers, stating that they 
``undermine market signals designed to boost domestic supply chains, 
particularly for key articles, materials, and supplies in critical 
supply chains,'' and that ``[w]aivers that are overly broad will tend 
to undermine domestic preference policies.'' Section VI also states 
that public interest waivers of domestic content procurement 
preferences ``must be used judiciously and construed to ensure the 
maximum utilization of goods, products, and materials produced in the 
United States.''
---------------------------------------------------------------------------

    \8\ https://www.whitehouse.gov/wp-content/uploads/2023/10/M-24-02-Buy-America-Implementation-Guidance-Update.pdf.
---------------------------------------------------------------------------

D. Notice of Proposed Rulemaking

    Based on the comments received to the 2023 RFC, and after 
considering the President's policy, as embodied E.O. 14005, ``Ensuring 
the Future is Made in All of America by All of America's Workers,'' to 
maximize the use of goods, products, and materials produced in the 
United States; the intent of Congress, as expressed in BABA's 
preference against general applicability waivers; the purpose and goals 
of domestic content procurement preferences and waivers; and FHWA's 
original rationale for issuing the Manufactured Products General 
Waiver, FHWA proposed to discontinue the Manufactured Products General 
Waiver and proposed regulatory standards for applying Buy America to 
manufactured products should the waiver be discontinued. 89 FR 17789 
(Mar. 12, 2024).\9\
---------------------------------------------------------------------------

    \9\ Throughout this document, the NPRM refers to both FHWA's 
proposal to discontinue the Manufactured Products General Waiver and 
to propose standards for applying Buy America to manufactured 
products.
---------------------------------------------------------------------------

    In proposing to discontinue the Manufactured Products General 
Waiver, FHWA noted that the intent of Congress, as expressed in 
sections 70933 and 70935 of BABA, and the President's policy for the 
Federal Government, as expressed in section 1 of E.O. 14005, is that 
Federal agencies should use terms and conditions in Federal financial 
assistance awards to maximize the use of goods, products, and materials 
produced in the United States, which would not be consistent with 
continuing the Manufactured Products General Waiver. Id. at 17795. FHWA 
also noted that continuing the waiver would undermine the purposes that 
domestic content procurement preferences, such as FHWA's Buy America 
requirement, are intended to serve. Id. Further, FHWA considered the 
Implementation Guidance's policy on waivers, that they should not be 
overly broad in order to ensure that they appropriately convey market 
signals on where the domestic supply chain can be bolstered and that 
they should be time-limited to ensure that, once available, Buy 
America-compliant materials can receive appropriate consideration for 
inclusion in federally funded projects. Id. Again, FHWA noted that the 
Manufactured Products General Waiver was inconsistent with these 
principles. Id.
    FHWA further observed that the Manufactured Products General Waiver 
was overly broad, disincentivizing manufacturers from domestically 
producing manufactured products by broadly covering all products, even 
those that are or could be produced domestically. Id. at 17795-96. 
Finally, FHWA noted that the waiver fails to provide domestic 
manufacturers with knowledge of the current gaps in the domestic 
manufacturing sector by covering all manufactured products, failing to 
provide market signals that distinguish between manufactured products 
that are domestically produced and those that are not. Id. at 17796. 
FHWA observed that this lack of clarity hinders manufacturers who wish 
to enter the market from understanding the competitive landscape, again 
disincentivizing them from attempting to provide domestic manufactured 
products on Federal-aid projects. Id. FHWA stated its belief that, in 
line with OMB's Implementation Guidance, waivers should aim to 
proactively encourage domestic manufacturing by providing clear market 
signals about which markets domestic manufacturers can enter with the 
reasonable expectation that their products could adequately compete for 
use on Federal-aid projects. Id.
    Accordingly, in the NPRM, FHWA stated its belief that the 
Manufactured Products General Waiver is overly broad, no longer in line 
with the purpose of domestic content procurement preferences and 
waivers, and therefore no longer in the public interest. Id. FHWA thus 
proposed to discontinue the Manufactured Products General Waiver. Id.
    In the NPRM, FHWA acknowledged that discontinuing the Manufactured 
Products General Waiver and applying Buy America requirements to 
manufactured products may result in cost increases, project delays, and 
product unavailability if not done carefully. Id. To mitigate this 
concern, FHWA stated that it would consider proposing targeted waivers. 
Id. Accordingly, FHWA published a Request for Information (RFI), 
seeking specific and detailed information on what products are not and 
cannot be produced in the United States in the near future. Id. at 
17796-97. FHWA stated in the NPRM that, based on the information 
received from this RFI, it would propose time-limited and targeted 
waivers covering domestically unavailable products if it would be 
appropriate to do so. Id. at 17797.
    FHWA also stated that were the Manufactured Products General Waiver 
to be rescinded, manufactured products would fall under the coverage of 
DOT's ``Waiver of Buy America Requirements for De Minimis Costs and 
Small Grants'' (``De Minimis and Small Grants Waiver''). 88 FR 55817 
(Aug. 16, 2023). The De Minimis Costs and Small Grants Waiver would 
then waive the application of FHWA's Buy America requirements for 
manufactured products under a single financial assistance award for 
which (1) the total value of non-compliant products is no more than the 
lesser of $1 million or 5 percent of total applicable costs \10\ for 
the project (``departmental de minimis waiver''); or (2) the total 
amount of Federal financial assistance applied to the project,

[[Page 2936]]

through awards or subawards, is below $500,000 (``small grants 
waiver''). 88 FR 55820.
---------------------------------------------------------------------------

    \10\ Per the De Minimis Costs and Small Grants Waiver, ``total 
applicable project costs'' are defined as the cost of materials used 
in the project that are subject to a domestic preference 
requirement, including materials that are within the scope of an 
existing waiver.
---------------------------------------------------------------------------

    At the same time as FHWA proposed discontinuing the Manufactured 
Products General Waiver, the NPRM proposed adopting standards that 
would define, per the language in 23 U.S.C. 313, when a manufactured 
product is ``produced in the United States.'' Id. In doing so, FHWA 
recognized that while it had the discretion to define Buy America 
requirements for manufactured products, those standards would have to 
meet or exceed those under BABA.\11\ Id. To minimize burden and ensure 
consistency with other Federal agencies implementing BABA, FHWA 
proposed to adopt standards closely similar to those under BABA. Id. 
Thus, FHWA proposed to adopt the definition of when a manufactured 
product is ``produced in the United States'' that is found in section 
70912(6)(B) of BABA. Id. FHWA proposed to replace current Sec.  
635.410(c), which discusses the process for requesting a Buy America 
waiver and the procedures FHWA will take to respond to that request, 
with a new paragraph that would discuss these Buy America requirements 
for manufactured products. Id. at 17799.
---------------------------------------------------------------------------

    \11\ Per section 70917(a) and (b) of BABA, BABA's domestic 
content procurement preferences apply unless a Federal Agency has a 
domestic content procurement preference that meets or exceeds the 
requirements of section 70914 of BABA. This means that were FHWA to 
enact less stringent Buy America requirements to manufactured 
products than in BABA, both those requirements and BABA's 
requirements would become effective, essentially raising the 
requirements to BABA's level of stringency.
---------------------------------------------------------------------------

    Further, FHWA proposed to replace mentions of ``steel or iron 
materials'' and ``steel and iron materials'' in Sec.  635.410(b) with 
the single phrase of ``iron or steel products,'' which FHWA proposed to 
define at Sec.  635.410(c)(1)(ii). FHWA did not otherwise propose to 
modify the application of the current Buy America requirements to steel 
and iron in Sec.  635.410(b).
    FHWA received 136 comments to the NPRM and 41 comments to the RFI 
from State departments of transportation (State DOTs), local 
governments, manufacturers, associations, and individual citizens. FHWA 
first discusses comments on the proposal to rescind the Manufactured 
Products General Waiver.

III. Rescission of the Manufactured Products General Waiver

    Many commenters to the NPRM and RFI expressed their opinion on 
whether FHWA should finalize its proposal to discontinue the 
Manufactured Products General Waiver. While many of these comments are 
similar to those submitted to the 2023 RFC and discussed in the NPRM, 
FHWA summarizes them below.

A. Comments in Favor of Rescinding the Manufactured Products General 
Waiver

    Generally, commenters in favor of recission argued that doing so 
would have positive economic impacts. These commenters argued that 
rescinding the waiver would stimulate economic growth, create and 
protect American jobs, and restore America's manufacturing base. 
Commenters in favor of rescinding the waiver also stated that doing so 
would fortify America's domestic supply chains, increasing national 
security by minimizing dependence on foreign sources and preventing 
supply chain shocks due to foreign pressures. Such commenters argued 
that fortifying domestic supply chains may even curb the rising cost of 
materials.
    Those in favor of rescission further argued that doing so is 
important to domestic manufacturers and workers, ensuring that taxpayer 
funds go to U.S. businesses. FHWA received comments from manufacturers 
stating that they produce manufactured products domestically but have 
to compete with cheaper foreign products on Federal-aid projects. 
Commenters stated that, contrary to the current situation, rescinding 
the waiver would provide domestic manufacturers and workers the first 
opportunity to supply products on Federal-aid projects. Commenters, 
particularly manufacturers, also argued that rescinding the waiver 
would both incentivize domestic manufacturers to onshore production and 
incentivize current domestic manufacturers and manufacturers who might 
onshore in the near future to increase their domestic manufacturing 
capacity. Commenters also indicated that manufacturers may be waiting 
for regulatory certainty before increasing domestic capacity.
    Other commenters espoused their belief in the benefits of 
domestically produced products themselves, stating they are of higher 
quality and manufactured with improved labor and environmental 
standards versus foreign products. Commenters further argued that 
domestic manufacturing is likely to spur innovation and the development 
of new technologies.
    Commenters in favor of rescission further pressed that the 
Manufactured Products General Waiver is inconsistent with the 
Administration's priorities, the clear text of 23 U.S.C. 313, and the 
congressional intent of BABA. With respect to BABA, such commenters 
argued that the findings in section 70911, the requirement in section 
70914 to apply requirements to manufactured products, the definition of 
``deficient programs'' in sections 70912 and 70913(c), and the 
requirement for Federal agencies to review existing waivers of general 
applicability in section 70914(d) all indicated congressional 
disapproval of existing waivers of general applicability like the 
Manufactured Products General Waiver.
    Finally, commenters in favor of rescinding the Manufactured 
Products General Waiver argued that it is inconsistent with the purpose 
of waivers of domestic content procurement preferences. Such commenters 
stated that waivers of domestic content procurement preferences should 
be transparent, targeted, time-limited, and used only when necessary; 
these commenters argued that the Manufactured Products General Waiver 
is inapposite to these principles as it covers all manufactured 
products for an indeterminate period of time. Commenters continued that 
the overbroad nature of the Manufactured Products General Waiver makes 
the current supply of domestic products unclear, disincentivizing 
manufacturers from attempting to produce manufactured products 
domestically.

B. Comments in Favor of Continuing the Manufactured Products General 
Waiver

    Some commenters in favor of continuing the Manufactured Products 
General Waiver expressed opposition to domestic content procurement 
preferences entirely, stating that they run counter to free trade 
agreements and negatively affect the economies of countries that use 
them.
    For those specifically suggesting that FHWA maintain the 
Manufactured Products General Waiver, many argued that there will be an 
insufficient number of Buy America-compliant manufactured products, 
either because of a lack of current supply or because the current 
supply would be insufficient given the increased demand for compliant 
products that would result if the waiver were rescinded. Some 
commenters suggested that some products and components may never be 
able to be produced domestically, due, for example, to a lack of 
domestic raw materials or prohibitive environmental regulations.
    In comments to the NPRM and RFI, commenters expressed particular 
concern over the domestic availability of certain products, as listed 
below.
 luminaires (including light-emitting diode (LED) luminaires)
 LED lighting systems
 road weather information systems

[[Page 2937]]

 bridge joints and bearing pads
 video imaging systems
 video imaging vehicle detection system
 closed-circuit television cameras
 permanent crash cushions
 generators
 pumps and other products used in pump stations
 spread spectrum radios
 electronic screening equipment
 electronic message signs
 rolled erosion control products
 traffic signals and signal systems
 traffic buttons
 traffic signal controllers
 traffic cabinets
 lane use control signals
 pedestrian crossing beacons
 traffic sensors
 other products in traffic management systems
 environmental sensors
 avalanche control systems
 aeration equipment
 battery backup systems
 retroreflective sheeting
 ultraviolet disinfection equipment
 crossarms and crossarm braces
 railroad ties
 railroad spikes and other supports
 precast concrete
 rolling stock
 various other ITS technologies and electrical equipment
 various other information communication technologies and 
network communication devices
 various pieces of utility equipment

    FHWA notes, however, that some products commenters described as 
being unavailable domestically were described by others as being 
available. FHWA also notes that it has not made any determinations on 
whether these items would be considered manufactured products under the 
standards promulgated in this final rule, and that some could be 
classified as iron or steel products or construction materials, or as 
components of manufactured products, rather than manufactured products 
themselves. FHWA discusses how to determine the classification of a 
single item below in the analysis of Sec.  635.410(c)(2).
    Commenters also argued that rescinding the waiver would increase 
the cost of manufactured products and the cost of the projects using 
them. Commenters generally stated that this cost increase would be 
caused by reducing the supply of manufactured products that could be 
used on Federal-aid projects by removing the ability to use foreign 
products. Commenters also indicated that costs may increase if imposing 
Buy America requirements for manufactured products limited the number 
of compliant manufacturers to the point where monopolies for certain 
products formed. Commenters also argued that foreign products are, on 
average, less costly than domestically produced products, noting that, 
otherwise, domestic products would already be used in Federal-aid 
projects and Buy America requirements would be unnecessary. Further, 
commenters argued that the imposition of Buy America requirements on 
manufactured products may incentivize manufacturers to use more 
expensive domestic components to ensure that their products meet the 55 
percent requirement. Certain commenters also stated that project costs 
would increase from higher bid prices due to contractors pricing the 
risk of not procuring compliant manufactured products into their bids. 
Other commenters raised concern that project costs may increase because 
there would be fewer bidders, as some contractors may not place bids if 
they are unsure about procuring compliant products.
    Commenters also raised concerns about the increased costs that 
imposing Buy America requirements on manufactured products may cause to 
contractors and manufacturers. Commenters stated that costs to 
contractors could increase from a lack of compliant products, producing 
delays that could result in increased incidental costs and the costs of 
repeated demobilization and mobilization. Similarly, commenters also 
raised concern over the imposition of penalties related to contract 
administration if contractors were unable to acquire compliant 
products. Other commenters stated that the imposition of requirements 
would require manufacturers to redevelop, redesign, and resource their 
products, all of which trigger increased costs.
    Commenters also questioned whether the new requirements would 
increase the amount of domestically manufactured products at all. Such 
commenters contended that manufactured products make up a minor portion 
of the total material cost of Federal-aid projects, which they alleged 
indicated that the market for any Buy America-compliant manufactured 
products may be too small to incentivize onshoring. In addition, these 
commenters argued that products that would be Buy America-compliant may 
not be competitive in the global market, further reducing the incentive 
for manufacturers who compete internationally to onshore production. In 
short, these commenters stated that manufactured products are not used 
in Federal-aid projects in large enough quantities to justify the 
additional costs that they alleged would be triggered by imposing Buy 
America requirements on manufactured products.
    In addition, commenters in favor of retaining the Manufactured 
Products General Waiver argued that removing the waiver and imposing 
Buy America requirements on manufactured products may cause project 
delay or cancellation. Such commenters argued that reducing the supply 
of products that could be used on Federal-aid projects is likely to 
create material shortages. If a Buy America-compliant product is 
unavailable, commenters warned that contracting agencies would need to 
either acquire a waiver to procure a non-compliant product, which would 
require time and cost to try to procure; wait for the product to be 
produced domestically; or redesign the project. Commenters also noted 
the delay in developing projects that would result from the time needed 
for contracting agencies to modify contract specifications and bid 
documents, for contractors to prepare bids based on the new 
requirements, and for manufacturers to produce sufficient amounts of 
compliant products.
    Commenters also raised concerns that imposing Buy America 
requirements on manufactured products may hinder the ability of 
contracting agencies and contractors to change project design or scope 
quickly, given the inability to turn to foreign products. Similarly, 
manufacturers presented concerns that imposing requirements would 
prevent them from being able to quickly switch to foreign suppliers if 
required by circumstances.
    Overall, many commenters opposing removing the Manufactured 
Products General Waiver and imposing Buy America requirements on 
manufactured products argued that doing so would result in fewer 
projects or projects of lesser quality. These commenters alleged that 
by making projects more costly and causing increased project delays and 
potential cancellations, imposing Buy America requirements on 
manufactured products would result in contracting agencies being able 
to complete fewer projects. This would then eliminate the benefits such 
projects would otherwise bring, such as safety, quality of life, 
sustainability, resiliency, and economic development improvements. 
Commenters also argued that imposing requirements may result in 
modifications to projects that would reduce their benefits, stating 
that contracting agencies and contractors may attempt to avoid using 
manufactured products on projects to

[[Page 2938]]

avoid triggering the new requirements. In addition, commenters 
complained that imposing Buy America requirements on manufactured 
products would exacerbate the current obstacles facing the construction 
industry, such as the unavailability of certain products, supply chain 
disruptions, inflation and other price increases, and labor shortages.
    Another common criticism raised by commenters involved the 
administrative burden of ensuring compliance with new requirements. 
Commenters protested the time and difficulty they thought would be 
needed to trace the origin and cost of components, particularly on 
smaller companies and disadvantaged business enterprises. Commenters 
also raised concerns that it may be laborious to identify the cost and 
origin of components as manufacturers may not know this information, 
have an incentive to provide this information, or want to provide 
detailed and potentially proprietary information on their products. 
These commenters further argued that this process of identifying 
components would be unduly burdensome when purchasing products from 
third parties. Commenters also raised the concern that, because the 
proposed Buy America standards require that more than 55 percent of 
components, by cost, must be produced in the United States, the 
fluctuation in the cost of components may result in sudden changes to 
whether a product is compliant. Other commenters raised concerns over 
the administrative burden to test and reevaluate new, compliant 
products. In general, commenters argued that these concerns are 
particularly heightened because parties are still adjusting to the 
burden caused by the addition of BABA's construction material 
requirements.
    A different set of concerns was raised by commenters who procure 
manufactured products for both Federal-aid projects and other projects. 
In general, many of these commenters stated that their process was to 
procure manufactured products in large quantities to be used for later 
projects, some of which may be federally funded but some of which might 
not be. Such commenters stated that imposing Buy America requirements 
on manufactured products would likely require them to procure products 
on a project-specific basis, which would increase costs and cycle 
times; purchase only Buy America-compliant products, which may result 
in the compatibility concerns described below; or maintain inventories 
of both Buy America-compliant and non-compliant products. These 
commenters stated that this last option would result in more 
variability, necessitating increased training and knowledge to complete 
common maintenance, repair, and replacement functions and to manage 
infrastructure. Commenters also expressed concern that procuring 
compliant and non-compliant products would require more physical space 
to house and segregate the products.
    Those in favor of retaining the Manufactured Products General 
Waiver also expressed concern that domestic components and products 
will not be compatible with currently used components, products, and 
systems. These commenters warned that a lack of compatibility between 
existing non-compliant components, products, and systems and compliant 
components and products may necessitate the complete replacement of 
products or systems when a component or product has to be replaced. 
Commenters also argued that imposing requirements on manufactured 
products may prevent entities from using specialized products that are 
necessary to meet regulatory requirements or required specifications if 
such products are not domestically produced.
    Other commenters that were in favor of maintaining the Manufactured 
Products General Waiver, contrary to those in favor of rescinding the 
waiver, argued that foreign products may be of higher quality than 
domestic products, have a track record of quality that domestic 
products lack, be more technologically advanced or innovative, or have 
reduced environmental impacts. Commenters raised particular concerns 
that, in order to meet the proposed Buy America requirements, 
manufacturers may opt to incorporate lower-quality domestic components 
into their products. Commenters warned that imposing requirements on 
manufactured products may also stifle economic development of 
manufacturers, leading to job loss.
    Finally, commenters argued that the problems with imposing Buy 
America requirements to manufactured products would not be solved 
through the application of the De Minimis and Small Grants waiver. 
These commenters stated that projects procuring manufactured products 
may not be covered by the De Minimis and Small Grants waiver because 
the project heavily involves the procurement of manufactured products 
or the procurement of manufactured products is itself the focus of the 
project, or because the project simply is of too large a scale. 
Commenters also criticized the burden needed to track the costs of 
materials for purpose of the departmental de minimis waiver, 
particularly for utilities.

C. FHWA Response

    FHWA again notes that many of the comments received to the NPRM 
reflect the same concerns commenters made in response to the 2023 RFC. 
As stated in the NPRM, FHWA does not believe they reflect justified 
reasons to continue the Manufactured Products General Waiver without 
change. In general, these comments do not reflect concern over 
rescinding the Manufactured Products General Waiver entirely, but the 
effect such rescission may have on specific products or categories of 
products if rescission of the waiver results in them not being 
domestically produced in sufficient quantities. For instance, FHWA does 
not believe that commenters claiming that there will not be sufficient 
numbers of Buy America-compliant products justifies retaining the 
waiver; it, instead, calls for manufacturers, recipients of FHWA 
financial assistance, and FHWA to work together to identify the 
products that are not in fact domestically manufactured in sufficient 
amounts and for FHWA to issue waivers for those products. As described 
in more detail in section V, below, FHWA intends to mitigate this 
concern by phasing in the requirements of this rule, analyzing which 
products and categories of products may require waivers, and issuing 
waivers if appropriate.
    To take another example, while FHWA understands that some Buy 
America-compliant manufactured components and products will not be 
compatible with existing components, products, and systems, FHWA does 
not find this a sufficient reason to continue the Manufactured Products 
General Waiver in its entirety, given that the Manufactured Products 
General Waiver sweeps much more broadly than just products that are 
replacing existing products and systems. This may be a reason to 
consider granting a product-specific waiver, but FHWA does not believe 
it justifies maintaining the Manufactured Product General Waiver's 
coverage of unrelated products. Similarly, FHWA does not believe that 
the fact that some entities may use specialized products or that some 
specific products may be preferred by entities justifies retaining the 
Manufactured Product General Waiver for unrelated products; they, at 
best, are reasons for considering waivers for specific products when 
these specific occurrences arise.
    Similarly, many commenters argued that because domestic 
manufacturers

[[Page 2939]]

will not spring up to provide Buy America-compliant products and 
components, removing the Manufactured Products General Waiver will 
result in negative consequences, such as higher costs, reduced 
flexibility, and potential project delays and cancellations. FHWA does 
not believe that this concern justifies maintaining the Manufactured 
Products General Waiver; it suggests that were domestic manufacturers 
not to emerge, FHWA should consider issuing waivers for products of 
limited domestic availability. Again, as described in more detail in 
section V, FHWA believes it important to first consider the impacts of 
this final rule on manufacturers before issuing any waivers. As 
provided in E.O. 14005 and section 70911 of BABA concerning the 
benefits of Buy America in general, this rule will provide a powerful 
incentive for manufacturers to onshore production that does not 
currently exist under the Manufactured Products General Waiver. During 
the transition period before the new Buy America requirements for 
manufactured products become effective, FHWA will be able to more fully 
analyze the extent of this onshoring. In the event that a market for 
some manufactured products does not develop, FHWA will be able to 
identify those products and consider waivers accordingly.
    Overall, FHWA does not believe that these arguments answer FHWA's 
concern, discussed in the NPRM, that the Manufactured Products General 
Waiver is overly broad and no longer in line with the purpose of 
domestic content procurement preferences and waivers. Instead, they 
suggest either that commenters believe that no categories of 
manufactured products will ever be domestically produced in sufficient 
quantities or that commenters believe that the overbroad nature of the 
Manufactured Products General Waiver is justified because of the issues 
that specific products or categories of products may face when 
complying with Buy America requirements.
    Based on comments from manufacturers who currently produce domestic 
products and who stated that they would increase capacity if the waiver 
were rescinded, FHWA believes that at least some manufactured products 
will be domestically produced in sufficient quantities. Further, FHWA 
does not believe that continuing the overbroad Manufactured Products 
General Waiver is necessary because of the difficulties some products 
or categories of products may face in complying with Buy America 
requirements. FHWA understands the concern that some products may not 
be domestically available; FHWA further believes this concern is 
heightened for certain ITS and other electronic products, utility 
products, and products used in railroad work. As stated in the NPRM, 
however, FHWA believes that the more preferable approach is to issue 
waivers, as appropriate, for those products and categories of products. 
In this way, such targeted waivers can provide manufacturers with 
insight into market demand that can trigger investments into domestic 
manufacturing in specific products, which cannot happen under the 
Manufactured Products General Waiver. FHWA believes that this approach 
can ensure that manufactured products needed for Federal-aid projects 
are available while also providing an opportunity to domestic 
manufacturers who can provide manufactured products to these projects 
where a waiver is not needed. FHWA discusses its intended process for 
implementing such waivers, where necessary, in section IV.
    FHWA does recognize that some concerns over removing the 
Manufactured Products General Waiver and imposing Buy America 
requirements on manufactured products apply regardless of whether 
domestic manufacturers ever produce sufficient amounts of domestic 
products. These include concerns that imposing such requirements is 
contrary to free trade agreements; that imposing Buy America 
requirements will inherently increase the cost of all products that are 
not currently compliant and require manufacturers to redevelop, 
redesign, and resource their products; that projects may be delayed as 
parties modify contract specifications and bid documents and 
contractors prepare bids; and the administrative burden of imposing new 
requirements.
    Some of these concerns inherently reflect the fact that FHWA is 
imposing new Buy America requirements on Federal-aid projects. For 
instance, FHWA believes it apparent that many manufacturers will have 
to shift to making products compliant with requirements that would 
otherwise not exist; that contract specifications and bid documents 
will have to be changed to include new requirements, and that 
contractors will need time to prepare bids after considering the new 
requirements; and that the new requirements will pose administrative 
burden on those responsible with complying with them. FHWA acknowledges 
the burden that such activities could place on affected parties, but 
FHWA believes that the overall public interest in the policies behind 
Buy America (as described in E.O. 14005 and section 70911 of BABA) is 
better served by considering these issues when determining the date on 
which to first apply the new Buy America requirements as well as the 
need for potential future waivers rather than whether to rescind the 
Manufactured Products General Waiver and impose Buy America 
requirements at all. Were these concerns sufficient to continue the 
Manufactured Products General Waiver, the waiver would seemingly be 
required to remain in effect indefinitely, even if there were 
sufficient sources of all manufactured products used on Federal-aid 
projects. FHWA does not believe this can be a sensible outcome. FHWA 
believes that the better approach is to allow for time for affected 
parties to set up processes to handle the change in regulatory 
requirements, which FHWA intends to do by implementing the final 
assembly and 55 percent requirements over time, as described in more 
detail below in section V.
    FHWA also acknowledges, as explained in more detail in the RIA, 
that rescinding the Manufactured Products General Waiver and applying 
Buy America requirements to manufactured products may lead to an 
increase in cost in some products. While the price of products and 
components may increase, FHWA believes that this is the natural result 
of achieving the goal of increasing domestic manufacturing, as stated 
in E.O. 14005 and BABA.\12\ Were domestic products available at the 
same or a lower price than foreign products, FHWA would expect 
contracting agencies to purchase domestic products even if no Buy 
America requirements existed, creating a domestic supply of 
manufactured products. The fact that commenters indicated that this is 
not the case demonstrates that contracting agencies procure foreign 
products because they are less expensive than domestic alternatives. 
The imposition of domestic content procurement preferences should thus 
be expected to increase the cost of procuring the projects covered by 
those preferences. For manufactured products where manufactures onshore 
production of Buy America-compliant products, FHWA expects that the 
increase of the cost of the products will occur alongside

[[Page 2940]]

the creation of domestic manufacturing jobs. For manufactured products 
where manufacturers elect not to onshore production, FHWA intends to 
issue waivers to allow for the continued use of lower-priced foreign 
products, reducing or eliminating any burden from cost increases. While 
FHWA cannot determine at this point the extent to which manufacturers 
will onshore specific products, FHWA believes that this rulemaking will 
either have no effect on the cost of products or result in both 
increases in product costs and in increases in domestic manufacturing 
jobs.
---------------------------------------------------------------------------

    \12\ FHWA does not believe it is likely that manufacturers will 
use more expensive domestic components than necessary to ensure that 
their products have 55 percent of components, by cost, be produced 
in the United States. FHWA believes that such manufacturers would 
not be competitive in a market with other manufacturers who use less 
expensive domestic components.
---------------------------------------------------------------------------

    FHWA also acknowledges commenters who expressed opposition to Buy 
America requirements on the grounds that such requirements are counter 
to free trade agreements. Many free trade agreements, such as the 
United States-Mexico-Canada Agreement (USMCA), expressly exempt grants, 
loans, cooperative agreements, and other forms of Federal financial 
assistance from coverage. Other trade agreements, such as the World 
Trade Organization Agreement on Government Procurement, specifically 
exclude highway and mass transit projects from coverage. To the extent 
that FHWA's Buy America requirements would conflict with a trade 
agreement, FHWA believes that specific situation may justify a waiver 
of the requirements; FHWA does not believe that it would justify a 
waiver of Buy America requirements to all manufactured products.\13\
---------------------------------------------------------------------------

    \13\ For instance, the OMB Implementation Guidance states: ``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.''
---------------------------------------------------------------------------

    Finally, FHWA again notes that, once Buy America requirements apply 
to manufactured products, such products may be exempted by the De 
Minimis and Small Grants waiver. FHWA acknowledges that the De Minimis 
and Small Grants waiver will not exempt all manufactured products from 
Buy America requirements, as that was not the intention of the De 
Minimis and Small Grants waiver. As stated in the NPRM, the purpose of 
that waiver is to prevent the recission of the Manufactured Products 
General Waiver from affecting ``small projects and projects using 
limited amounts of manufactured products.'' Id. at 17797.
    In conclusion, after a careful review of all the comments received 
to the 2023 RFC and NPRM, FHWA believes that the Manufactured Products 
General Waiver is no longer in the public interest and is rescinding it 
for all recipients of FHWA financial assistance. As discussed in more 
detail in section V, FHWA recognizes that some products and categories 
of products may not be currently domestically produced in sufficient 
amounts. Rather than continue the Manufactured Products General Waiver, 
FHWA intends to analyze which products and categories of products may 
require waivers, and issue waivers where appropriate.

IV. General Comments

    FHWA next discusses general issues raised by commenters regarding 
the final rule. Section V then includes a discussion of specific 
regulatory provisions of the final rule.

Process for Rescission of Waiver

    Comment: In the NPRM, FHWA proposed to rescind the Manufactured 
Products General Waiver and, at the same time, issue time-limited and 
targeted waivers covering any manufactured products that FHWA 
determines are not currently produced in the United States and might 
not be able to be produced in the United States in the near future. 
Some commenters argued that FHWA should rescind the Manufactured 
Products General Waiver only when these time-limited and targeted 
waivers are in place. Others stated that FHWA should institute a 
delayed effective date for the rescission of the Manufactured Products 
General Waiver in general, and then set later effective dates for the 
application of Buy America requirements to particular products. Still 
other commenters argued for a different model, stating that FHWA should 
apply Buy America requirements to specific manufactured products based 
on their availability. Under this approach, FHWA would not set an 
effective date for the final rule upfront but rather gradually narrow 
the scope of the Manufactured Products General Waiver as FHWA removes 
specific manufactured products from its coverage as they become 
domestically available; FHWA would thus only fully rescind the waiver 
when suppliers could demonstrate the ability to provide Buy America-
compliant versions of all manufactured products used on Federal-aid 
projects. Other commenters suggested that FHWA should proceed with a 
stepped approach, first identifying products that are Buy America-
compliant and applying Buy America requirements to them, then 
identifying products that are manufactured in the United States and 
applying the final assembly requirement to them, and finally 
identifying products that are manufactured in the United States and 
meet the 55 percent requirement and apply both the manufactured and 55 
percent requirements to them. Other approaches raised by commenters 
include that FHWA should rescind the waiver for products only when 
there is a clear basis for expecting the emergence of U.S. sources, 
that FHWA should prioritize industry use cases and applications that 
are high value in national security where necessary investments are 
made domestically, and that FHWA should allow contracting agencies to 
continue to use existing systems and product sources while requiring 
them to study and develop a transition plan towards procuring Buy 
America-compliant products.
    FHWA Response: After reviewing the comments, FHWA concludes that 
the best approach is a transition to the final assembly and 55 percent 
requirements for Federal-aid projects. FHWA believes that this approach 
is similar to the approach discussed in the NPRM, where FHWA proposed 
to issue waivers at the same time as it would rescind the Manufactured 
Products General Waiver.
    While the NPRM indicated that FHWA would issue waivers at the same 
time as it issued a final rule, FHWA believes, after analyzing the 
comments received, that it is not necessary to issue waivers at this 
time. Based on comments received, FHWA recognizes that there are both 
domestic manufacturers of products used in Federal-aid projects and 
products for which there are no domestic manufacturers at the moment. 
For the latter group, FHWA does not believe it necessary to issue 
waivers at this time, as FHWA believes doing so will negatively affect 
onshoring that would otherwise be incentivized by the promulgation of 
this final rule. FHWA believes that by stating that it will impose the 
final assembly requirement on October 1, 2025, and the 55 percent 
requirement on October 1, 2026, manufacturers will be incentivized to 
begin onshoring production.
    FHWA does not believe that it is sensible to continue to apply the 
Manufactured Products General Waiver but only remove products from its 
coverage when it is shown that those products are domestically produced 
in sufficient amounts. Under this approach suggested by many 
commenters, Buy America requirements would not apply to manufactured 
products until a domestic market for those products has emerged. FHWA, 
however, does not believe it reasonable to apply Buy America 
requirements, which are designed to incentivize domestic production, 
only after domestic

[[Page 2941]]

production has been established. In addition, it is unclear if domestic 
markets for manufactured products would ever develop in this scenario; 
commenters did not provide sufficient evidence that manufacturers would 
onshore production if there were no immediate incentive to do so. FHWA 
finds it equally likely in such a scenario that the majority of 
manufacturers would elect not to onshore and that the Manufactured 
Products General Waiver would apply indefinitely for some products. 
That is not FHWA's intention; while there may be some manufactured 
products that require time-limited, targeted waivers, FHWA believes 
that those waivers should be granted when the incentive of Buy America 
requirements has failed to function, not when manufacturers have chosen 
to continue producing products abroad because FHWA has actively chosen 
to weaken that incentive.
    FHWA disagrees with commenters that it should only apply the final 
assembly and the 55 percent requirement to products when they are shown 
to meet them. For the same reasons stated above, FHWA believes that 
doing so removes the incentive for manufacturers to comply with the 
requirements. FHWA believes that Buy America requirements should apply 
to all manufactured products unless it can be shown that the specific 
products or categories of products require a waiver based on the 
conditions in 23 U.S.C. 313(b).

Transition Period for Requirements

    Comments: In the NPRM, FHWA sought comment on whether a transition 
period would be needed for its proposed Buy America requirements for 
manufactured products. This transition period would provide time 
between the publication of the final rule and the date on which the Buy 
America requirements for manufactured products would come into effect, 
requiring them to be produced in the United States. If commenters 
believed such a period was necessary, FHWA requested comment on what 
commenters believed the effective date of the proposed Buy America 
requirements should be.
    A small number of commenters argued that FHWA should not provide 
any sort of transition period, and that the proposed Buy America 
requirements should be effective immediately when the final rule became 
effective. These commenters argued that the Manufactured Products 
General Waiver was in effect for over 40 years, so it was necessary to 
act expediently to avoid continuing what these commenters viewed as its 
negative effects. These commenters also stated that BABA was enacted in 
November 2021, so affected parties had time to prepare for the 
imposition of Buy America requirements to manufactured products. 
Finally, these commenters argued that affected parties had additional 
time to prepare for the imposition of Buy America requirements to 
manufactured products as DOT and other Federal agencies employed 
various phase-in waivers for BABA's requirements.
    Other commenters suggested that FHWA provide a transition period 
for the imposition of Buy America requirements for all manufactured 
products, with commenters presenting various lengths that they believed 
were appropriate. Two commenters suggested a period of 180 days, one 
commenter suggested a transition period of 6 months, one commenter 
suggested a period of 9 months, four commenters suggested a period of 1 
year, one commenter suggested a period of 1 year after FHWA puts in 
place any product-specific waivers, six commenters suggested a period 
of 18 months, one commenter suggested a period of between 18 and 24 
months, one commenter suggested a period of 2 years, one commenter 
suggested a period of 2 years for Federal awards obligated after the 
effective date of the final rule, one commenter suggested a period of 
30 months, seven commenters suggested a period of 3 years, one 
commenter suggested a period of 38 months, one commenter suggested a 
period of 4 years, and two commenters suggested a period of 5 
years.\14\ In addition, one commenter suggested that the Manufactured 
Product General Waiver should be continued for at least a few more 
years and another suggested that FHWA should delay implementation of 
any requirements for 3 to 5 years.\15\
---------------------------------------------------------------------------

    \14\ In addition, one commenter stated that FHWA should withdraw 
its proposed rule and continue its general applicability waiver for 
eighteen months and another commenter stated that FHWA should review 
the Manufactured Products General Waiver after 5 years. As neither 
commenter indicated that FHWA would rescind the Manufactured 
Products General Waiver at the end of these time periods, FHWA does 
not view these comments as commenting on a proposed transition 
period, but rather comments arguing that FHWA should continue the 
Manufactured Products General Waiver. FHWA's response to comments 
arguing to continue the Manufactured Products General Waiver can be 
found in section IV.
    \15\ Other commenters stated what they believed the effective 
date should be for specific categories of manufactured products. 
While useful in providing information on the necessity of waivers 
for those specific products, FHWA does not believe it appropriate to 
base the effective date of imposing Buy America requirements on all 
manufactured products on the effective date for specific products.
---------------------------------------------------------------------------

    Commenters gave various reasons for why they believed a transition 
period was necessary. These include that DOT imposed a phase-in period 
for BABA's construction material requirements; \16\ that other Federal 
agencies imposed a phase-in period for BABA's requirements; the time 
required for FHWA to formulate, review, and approve any product-
specific waivers, including the time for FHWA to determine which 
products used on Federal-aid projects are BABA-compliant and conduct 
market research on those that are not; the time required for FHWA to 
provide any guidance on the new requirements; the time required for 
manufacturers, contractors, and contracting agencies to determine if 
the products they manufacture and use are compliant with the new 
requirements; the time for manufacturers, contractors, and contracting 
agencies to update and modify their current Buy America processes, 
including the time to set up systems for compliance, train personnel 
and other stakeholders on the new requirements and processes, rewrite 
standard specifications, materials lists, and bid documents, and modify 
any guidance documents; the time for manufacturers to onshore domestic 
production of manufactured products and components, including the time 
for manufacturers to exit long-term leases, contracts, and other 
obligations manufacturers might have overseas, establish domestic 
manufacturing sites and supply chains, redesign products, test and 
certify products; the time for manufacturers to produce a sufficient 
amount of compliant products to have on hand; the time for project 
designers to incorporate the new Buy America requirements into future 
projects; the time for affected parties to understand and process how 
the new requirements will impact the design, construction, and costs of 
future projects; the time for contracting agencies to test and approve 
newly designed manufactured products; the time for contracting agencies 
and contractors to identify new vendors and adjust any product occurs; 
the time for affected parties to consume their stock of existing 
manufactured products and retire existing contractual agreements; and 
the time for contracting agencies and contractors to stockpile 
materials.
---------------------------------------------------------------------------

    \16\ See 87 FR 31931 (May 25, 2022), issuing a general waiver of 
the BABA requirements for DOT-funded programs for a period of 180 
days.
---------------------------------------------------------------------------

    FHWA Response: After reviewing the comments received, FHWA believes 
that a transition period is necessary for the reasons identified by 
commenters to implement the new Buy America requirements, and FHWA thus 
disagrees

[[Page 2942]]

with commenters arguing against the imposition of any such period. 
While FHWA understands the urgency some commenters feel to rescind the 
Manufactured Products General Waiver, FHWA believes it must do so with 
consideration of the issues raised by commenters to ensure that 
affected parties are ready to apply Buy America requirements to 
manufactured products used on Federal-aid projects. Further, FHWA does 
not believe that the fact that BABA was enacted in November 2021 and 
that other Federal agencies have imposed phase-in waivers for its 
requirements justifies not having a transition period for the 
imposition of FHWA's Buy America requirements. While BABA was enacted 
in November 2021, FHWA has been consistent in stating that, due to 
section 70917(a)-(b), BABA's manufactured product requirements do not 
apply to Federal-aid projects.\17\ FHWA thus does not believe it 
reasonable to now state that contracting agencies, contractors, and 
manufacturers should have been preparing for the implementation of Buy 
America requirements on manufactured products on Federal-aid projects 
because BABA applied a domestic content procurement preference to 
manufactured products on projects funded by other agencies.\18\ 
Similarly, FHWA does not find it reasonable to believe that contracting 
agencies, contractors, and manufacturers should have been preparing for 
the implementation of Buy America requirements on manufactured products 
on Federal-aid projects during transitional waivers granted by other 
agencies for other programs.
---------------------------------------------------------------------------

    \17\ See https://www.fhwa.dot.gov/construction/contracts/buyam_qa_baba_pre10232023.cfm.
    \18\ FHWA recognizes that there may be entities that produce or 
utilize products in some projects that are covered by FHWA's Buy 
America statute and in other projects that are covered by BABA or 
Buy America requirements applicable to other DOT agencies. Indeed, 
FHWA believes that one of the benefits of imposing Buy America 
requirements on manufactured products that are similar to the 
requirements in BABA is the uniformity provided to contracting 
agencies, contractors, and manufacturers. At the same time, FHWA 
believes, based on the comments received to the NPRM, that 
contracting agencies, contractors, and manufacturers that are 
involved in Federal-aid projects have not completely shifted their 
processes and production of products used on Federal-aid projects to 
be BABA-compliant. Thus, while uniformity may provide some benefits 
to certain entities and products in the future, FHWA believes that 
there is a current lack of uniformity. In short, FHWA does not 
believe that the transition period given for BABA should be thought 
of as serving as a transition period for FHWA's Buy America 
requirements for manufactured products.
---------------------------------------------------------------------------

    In determining the appropriate time to apply the new Buy America 
requirements, FHWA carefully reviewed the different periods suggested 
and the reasoning behind them. Based on this review, FHWA believes that 
it is appropriate to have a longer transition period for the 55 percent 
requirement than the final assembly requirement, given that many of the 
reasons provided by commenters for why a transition period is needed do 
not apply or apply with less force to the imposition of the final 
assembly requirement. For instance, determining whether a product is 
manufactured in the United States is much simpler and clearer than 
determining whether more than 55 percent of its components, by cost, 
are produced in the United States. Similarly, FHWA expects the time for 
manufacturers to shift production to be compliant with the final 
assembly requirement to be much less than the time needed to be 
compliant with the 55 percent requirement, which requires shifting 
supply chains and component manufacturing to the United States. 
Further, FHWA does not believe that a manufacturer's decision to shift 
manufacturing products from overseas to the United States will impact 
the product itself to the same degree as changing the source of the 
product's components; thus, FHWA does not believe that requiring 
products to be manufactured in the United States will result in the 
same effects to project development that the 55 percent requirement 
may.
    At the same time, FHWA recognizes that even imposing this final 
assembly requirement will require contracting agencies, contractors, 
and manufacturers to devote time to modifying their processes to 
account for this new requirement. FHWA acknowledges that these parties 
may be required to update standard specifications, material lists, and 
bid documents; modify guidance documents; and identify new vendors that 
can provide products meeting the final assembly requirements. After 
considering the range of transition periods suggested by commenters and 
the reasoning behind those dates, FHWA believes it appropriate to apply 
the final assembly requirement for Federal-aid projects on October 1, 
2025. While this is on the lower end of the range of dates suggested by 
commenters, FHWA notes that commenters suggested ranges for the 
transition periods of both the final assembly and 55 percent 
requirements. As FHWA believes that many of the concerns raised by 
commenters reflect more heavily concerns with implementing the 55 
percent requirement, FHWA believes that a choice on the lower end of 
the suggested range is appropriate. Based on the comments received, 
FHWA believes that this will provide time for contracting agencies, 
contractors, and manufacturers to be prepared for the imposition of the 
final assembly requirement with minimal disruption to the construction 
of Federal-aid projects. Simultaneously, FHWA believes that this date 
will provide an incentive for manufacturers to begin moving final 
assembly of manufactured products to the United States.
    At the same time, FHWA recognizes that some manufacturers may not 
ultimately move final assembly of their products to the United States 
and that domestic companies may not emerge that manufacture certain 
products in the United States. For that reason, from the effective date 
of this rule to October 1, 2025, FHWA will monitor the status of the 
domestic market of manufactured products that can comply with the final 
assembly requirement. Based on FHWA's analysis, FHWA may choose to 
delay the start date for the final assembly requirement by issuing a 
temporary waiver of the final assembly requirement for manufactured 
products if more time is needed to onshore domestic production; 
however, FHWA maintains that it is important for this rulemaking to 
send out a clear market signal to begin that process of onshoring, even 
if it takes longer than FHWA currently expects. While commenters 
suggested a shorter transition period before imposing the final 
assembly requirement may be possible, such a shorter period may not 
provide FHWA time to properly monitor changes in the market and adjust 
accordingly.
    FHWA believes that a longer transition period is necessary before 
imposing the 55 percent requirement. Based on the range of comments 
received on the preferred duration of a transition period, from 6 
months to 5 years, FHWA finds it reasonable to begin the 55 percent 
requirement for Federal-aid projects on October 1, 2026. At this point, 
starting on October 1, 2026, manufactured products permanently 
incorporated into Federal-aid projects will need to comply with both 
the final assembly and 55 percent requirements. FHWA believes that a 
transition period ending on September 30, 2026, for the 55 percent 
requirement, which also serves as a transition period for the full 
imposition of FHWA's Buy America requirements for manufactured 
products, reflects the general middle ground of dates suggested by 
commenters. FHWA believes that a shorter transition period may not give 
contracting agencies, contractors, and manufacturers time to

[[Page 2943]]

adjust to the new requirements. Conversely, FHWA believes that a longer 
transition period may not send the proper market signals to 
manufacturers to incentivize them to begin onshoring as soon as they 
are able to. FHWA believes that the transition period should reflect 
the minimum amount of time for affected parties to ready themselves for 
the new requirements. While some parties may desire a longer timeframe, 
FHWA believes that transition period through September 30, 2026, before 
imposing the 55 percent requirement provides this minimum amount of 
time.
    FHWA nonetheless will monitor the status of the domestic market and 
the progress contracting agencies, contractors, and manufacturers are 
making to ready themselves for the imposition of the 55 percent 
requirement. FHWA may modify the start date of the 55 percent 
requirement based on information received by issuing a temporary, time-
limited waiver of its Buy America requirements for manufactured 
products. In addition, prior to imposing the 55 percent requirement, 
FHWA intends to continue to perform market research, analyzing the 
effects issuance of this final rule has on the domestic market for 
manufactured products and listening to affected parties, including any 
parties requesting prospective waivers of the 55 percent requirement. 
Based on that research and considering the comments to the RFI and any 
future RFIs, FHWA may propose targeted waivers covering products that 
do not meet the 55 percent requirement prior to those requirements 
taking effect.
    As discussed in more detail below, the start date for the final 
assembly and 55 percent requirements being promulgated in this final 
rule means that all Federal-aid projects obligated on or after those 
dates are subject to the applicable requirements.
    FHWA emphasizes that while the final assembly requirement does not 
begin until October 1, 2025, and the 55 percent requirement does not 
begin until October 1, 2026, the other regulatory changes in this final 
rule become operative for all Federal-aid projects obligated on or 
after March 17, 2025. This means that for all Federal-aid projects 
obligated on or after March 17, 2025, all iron or steel products, as 
defined in Sec.  635.410(c)(1)(iii), must comply with FHWA's Buy 
America requirements for steel and iron in Sec.  635.410(b). This also 
means that, for all Federal-aid projects obligated on or after March 
17, 2025, per Sec.  635.410(c)(2), articles, materials, and supplies 
should be classified as an iron or steel product, a manufactured 
product, or another product as specified by law or in 2 CFR part 184; 
an article, material, or supply must not be considered to fall into 
multiple categories. In other words, starting for all Federal-aid 
projects obligated on or after March 17, 2025, all iron or steel 
products must comply only with Sec.  635.410(b) and all manufactured 
products must comply only with Sec.  635.410(c), with the final 
assembly and 55 percent requirements taking effect later.
    In addition, for Federal-aid projects obligated on or after October 
1, 2025, manufactured products must comply with the final assembly 
requirement, and for Federal-aid projects obligated on or after October 
1, 2026, manufactured products must generally comply with both the 
final assembly and 55 percent requirements.
    As stated in the NPRM, FHWA does not intend for these new Buy 
America requirements to supplant current FHWA waivers that cover 
specific manufactured products. See 89 FR 17798. As noted in the NPRM, 
FHWA's Buy America requirements for manufactured products are 
substantively similar to those in FHWA's Electric Vehicle (EV) Charger 
Waiver, which waives FHWA's Buy America requirements to EV chargers 
under certain circumstances.\19\ Specifically, the EV Charger Waiver 
waives FHWA's Buy America requirements for EV chargers manufactured on 
or after March 23, 2023, and before July 1, 2024, if final assembly of 
the charger occurs in the United States and installation of the charger 
began by October 1, 2024. The EV Charger Waiver further waives FHWA's 
Buy America requirements for EV chargers manufactured on or after July 
1, 2024, if final assembly of the charger occurs in the United States 
and more than 55 percent of the charger's components, by cost, are 
manufactured in the United States. For all EV chargers covered by the 
waiver, if the charger's housing is predominantly iron or steel, it is 
not covered by the EV Charger Waiver and that housing must meet FHWA's 
existing Buy America requirements for steel and iron.
---------------------------------------------------------------------------

    \19\ Waiver of Buy America Requirements for EV Chargers, 88 FR 
10619, February 21, 2023.
---------------------------------------------------------------------------

    Presently, EV chargers covered by the EV Charger Waiver should 
either have already begun installation or be compliant with both the 
final assembly and 55 percent requirements. FHWA does not intend for 
its imposition of Buy America requirements to all manufactured products 
through this rulemaking to require EV chargers that have already begun 
installation to be pulled out of the ground, nor to set less stringent 
Buy America requirements on EV chargers than those that already exist 
under the EV Charger Waiver. FHWA therefore intends the EV Charger 
Waiver to continue to apply to EV chargers procured in FHWA funded 
projects, not the requirements and transition period set in this final 
rule. FHWA nonetheless notes that, for projects obligated on or after 
October 1, 2026, the requirements that apply to EV chargers and those 
that apply to other manufactured products will effectively be the same.
    In addition, besides manufactured products covered by existing FHWA 
waivers, per Sec.  635.410(c)(2)(i) and (ii), precast concrete products 
classified as manufactured products using the definition in Sec.  
635.410(c)(1)(iv) and ITS and other electronic hardware systems that 
are installed in the highway right of way or other real property and 
classified as manufactured products using the definition in Sec.  
635.410(c)(1)(iv) are subject to requirements on a different timeline 
than other manufactured products. For precast concrete products 
classified as manufactured products, components of the precast concrete 
products that consist wholly or predominantly of iron or steel or a 
combination of both, as defined in Sec.  635.410(c)(1)(vi), must 
continue to comply with FHWA's existing Buy America requirements for 
iron and steel at Sec.  635.410(b) in every Federal-aid project. 
Precast concrete products will then have to additionally comply with 
the final assembly requirement and the 55 percent requirement for 
Federal-aid projects obligated on or after October 1, 2026. This same 
timeframe applies to the application of the requirements in Sec.  
635.410(c)(2)(ii). The cabinets or other enclosures of ITS and other 
electronic hardware systems that are installed in the highway right of 
way or other real property and classified as manufactured products per 
Sec.  635.410(c)(1)(iv) that consist predominantly of iron or steel or 
a combination of both, as defined in Sec.  635.410(c)(1)(vi), must 
continue to comply with FHWA's existing Buy America requirements for 
iron and steel at Sec.  635.410(b) in all projects. The systems must 
then additionally comply with the final assembly requirement for 
Federal-aid projects obligated on or after October 1, 2025, and the 55 
percent requirement for Federal-aid projects obligated on or after 
October 1, 2026.
    FHWA discusses the requirements in Sec.  635.410(c)(2)(i) and (ii) 
in more detail below. FHWA notes that the specified steel and iron 
components of these products should currently be compliant

[[Page 2944]]

with FHWA's existing Buy America requirements for iron and steel if 
they are used on Federal-aid. FHWA is therefore continuing its existing 
requirements for these products and components without break, and FHWA 
is not adding any additional requirements in this respect.

Effect on Projects in Development

    Comments: In the NPRM, FHWA sought comment on whether there should 
be a buffer period for certain projects that are in development that 
have not had Federal awards obligated or authorized but have relied on 
the Manufactured Products General Waiver in project development. FHWA 
notes that this is distinct from the question regarding the transition 
period for the new Buy America requirements. The issue of the effect of 
rescission on projects in development concerns which projects, at the 
start of imposition of the final assembly requirement and later the 55 
percent requirement, are subject to those requirements based on their 
developmental status at the time.
    Commenters presented various views regarding what they believed was 
the appropriate point in project development to apply the new Buy 
America requirements for manufactured products. Some commenters 
suggested that the requirements should not apply to projects in the 
design stage at the time the requirements become effective; these 
commenters argued that doing so would avoid costly redesigns that delay 
construction and allow project designers to begin designing projects 
knowing which requirements would apply to those projects.
    Other commenters argued that the requirements should not apply to 
projects that have already gone out for advertisement or already 
solicited applications. Such commenters stated that this approach 
enables bidders and applicants to estimate project costs more 
accurately and prevents those costs from exceeding application 
estimates; in addition, these commenters stated that if price is a 
factor in award selection, this approach avoids reopening 
advertisements and solicitations and delaying awards. Commenters also 
stated that this would enable bidders and applicants to evaluate the 
domestic availability of manufactured products before responding to 
advertisements or solicitations, allowing the project to avoid delays 
that might occur if awarded contractors had to search for compliant 
products or potentially redesign the project. Commenters presented 
similar reasons for why any new requirements should not apply to 
projects that have already opened bidding when the new requirements 
become effective. One commenter argued that the requirements should not 
apply to projects that have been put out to bid or are put to bid 
within one year of final agency action, stating that this would allow 
contracting agencies to rely on the Manufactured Products General 
Waiver for projects already in the developmental process and avoid the 
loss of time and money that would occur if they had to be redesigned or 
rebid.
    Still other commenters argued that any new Buy America requirements 
for manufactured products should not apply to projects already 
obligated or authorized at the time the requirements become effective; 
such commenters stated that this would allow projects to be completed 
on time without significant cost changes and allow contracting agencies 
to include appropriate language in their contracts.
    Various commenters also suggested that the new Buy America 
requirements for manufactured products should not apply to projects 
already in the procurement phase to prevent unnecessary delays; that 
they should not apply to contracts already executed; that they should 
not apply to products already purchased prior to the final rule's 
effective date; that they should not apply to material procurement 
contracts for at least eighteen months after the final rule is issued; 
and that they should not apply to products purchased prior to the start 
dates of the requirements, provided that they are installed at least 
twelve months after delivery as parties may have acquired non-compliant 
products with long lead times.
    Finally, some commenters argued that any new requirements should 
not apply to projects at any stage in the project development process 
at the time the new requirements become effective. Commenters favoring 
this broad approach stated that it would avoid the loss of time and 
money that would occur if projects had to be redesigned or rebid.
    FHWA Response: After carefully reviewing the comments received, 
FHWA believes that the most appropriate choice is to have the new Buy 
America requirements for manufactured products apply to all Federal-aid 
projects obligated after the start dates of the requirements.\20\ This 
means that Federal-aid projects must comply with the final assembly 
requirement if obligated on or after October 1, 2025, and must comply 
with both the final assembly and 55 percent requirements if obligated 
on or after October 1, 2026. Federal-aid projects that have already 
obligated FHWA financial assistance before October 1, 2025, do not need 
to comply with the final assembly or 55 percent requirements. FHWA 
believes that the point of obligation represents a clear point after 
which Federal requirements, including Buy America, apply to a project. 
By applying FHWA's requirements at the point of obligation, FHWA also 
believes this aligns with the date on which Federal requirements, 
including FHWA's requirements, are generally triggered for a project. 
This is in contrast to more nebulous points suggested by commenters, 
such as the start of project development or design. While FHWA 
recognizes that some Federal-aid projects may be currently being 
designed based on the existing Manufactured Products General Waiver, 
FHWA believes that delaying the start dates of the Buy America 
requirements on manufactured products will allow changes to be made to 
those projects, if necessary, during the transition period to minimize 
disruption.
---------------------------------------------------------------------------

    \20\ FHWA discusses comments on projects using alternate 
delivery methods below.
---------------------------------------------------------------------------

    Similarly, for Federal-aid projects using advance construction 
(AC), FHWA believes that the new Buy America requirements for 
manufactured products should become effective for Federal-aid projects 
where FHWA approves the AC designation by the applicable start 
date.\21\ This means that for Federal-aid projects where FHWA approves 
the AC designation on or after October 1, 2025, the project must comply 
with the final assembly requirement. For Federal-aid projects where 
FHWA approves the AC designation on or after October 1, 2026, the 
project must comply with the final assembly and 55 percent 
requirements. For Federal-aid projects where FHWA approves the AC 
designation on or after October 1, 2025, but before October 1, 2026, 
the project must comply with the final assembly requirement but does 
not need to comply with the 55 percent requirement.
---------------------------------------------------------------------------

    \21\ Pursuant to 23 U.S.C. 115, AC allows a State DOT to begin 
work and incur costs that can later be reimbursed with Federal 
funding after FHWA approves a request to convert the AC from 
eligible for funding to an obligation to fund and reimburse.
---------------------------------------------------------------------------

    Per 23 U.S.C. 115(a)(2), a project proceeding under AC must 
generally be in accordance with all procedures and requirements 
applicable to the project. FHWA accordingly believes that, before 
requesting AC approval, a State DOT should be aware that the approval 
for the project will require the project to proceed in accordance with 
the Federal procedures and requirements generally

[[Page 2945]]

applicable to the project, including Buy America requirements for 
manufactured products. In addition, FHWA believes that the date of AC 
approval represents a clear point that makes clear to all affected 
parties which requirements apply to a given project.

Buffer Period for Projects in Development Using Alternate Delivery 
Methods

    Comments: In the NPRM, FHWA also requested comment on the 
appropriate buffer period, if any, for alternate project delivery 
methods. These alternative delivery methods are where contracts are 
awarded and work is authorized and obligated in phases, such as with 
design-build. Under this delivery method, FHWA may, for instance, 
obligate funds for the design phase of a project and then later 
obligate funds for the construction phase of a project.
    Commenters presented various arguments as to when any new Buy 
America requirements for manufactured products should take effect for 
projects using alternate delivery methods. Some commenters suggested 
that the requirements should not apply to the physical construction 
phase if FHWA financial assistance is obligated before the effective 
date of the new requirements or, similarly, that the requirements 
should only apply to new awards issued prior to the design and 
development phase. Other commenters relatedly suggested that the 
requirements should not apply to projects that have been initiated 
before the final rule's effective date, using the earliest obligation 
date for any phase of the project to serve as the date of initiation. 
Such commenters argued that this would allow projects to continue to 
rely on the Manufactured Products General Waiver when the project's 
estimates, designs, and scope have been prepared based on that waiver. 
Commenters stated that this would also prevent retroactive adjustments 
after contractors or consultants have been selected, which could 
otherwise cause delays, and avoid requirements from changing when a 
project advances from preconstruction to construction. Other commenters 
suggested that requirements should not apply to projects that have 
issued a Request for Qualifications (RFQ), stating that this would 
prevent wasting efforts taken by funding recipients to develop a cost 
estimate in advance of issuing the RFQ and ensure that the project is 
delivered as initially envisioned. Other commenters suggested that the 
new Buy America requirements for manufactured products should not apply 
to projects using alternate delivery methods when those projects have 
already entered the procurement phase or should be determined at the 
contracting officer's discretion.
    FHWA Response: FHWA has carefully analyzed the comments regarding 
alternate delivery methods. FHWA believes that the new Buy America 
requirements for manufactured products should apply to all Federal-aid 
projects where a contract providing for both the preconstruction (such 
as preliminary design under a design-build contract) and construction 
phases is in place, but the construction phase has not been obligated 
by the time of this final rule's start dates. In other words, for 
Federal-aid projects using alternate delivery methods, if the 
construction phase of the project is obligated on or after October 1, 
2025, the project must comply with the final assembly requirement, even 
if funds have been obligated for preconstruction phases prior to 
October 1, 2025. Similarly, if the construction phase for a Federal-aid 
project using alternate delivery methods is obligated on or after 
October 1, 2026, the project must comply with the final assembly and 55 
percent requirements, even if funds have been obligated for 
preconstruction phases prior to this date.
    While FHWA understands the opinion expressed by commenters to allow 
projects that have been obligated funds for preconstruction work to 
continue to rely on the Manufactured Products General Waiver if such 
obligation occurs prior to this rule's start dates, FHWA believes that 
the focus point should be on the obligation of funds for construction. 
In addition, FHWA generally believes that the transition period in this 
final rule should allow many Federal-aid projects currently in design 
to proceed to construction by the time the new requirements become 
effective. For Federal-aid projects that do not, the delayed start 
dates for the requirements will provide the necessary time for changes 
to occur to prepare for the imposition of the new requirements. FHWA 
has concerns that allowing Federal-aid projects to be covered by the 
Manufactured Products General Waiver if they are in preconstruction 
stages when the final assembly and 55 percent requirements become 
effective may be used to delay the full application of the new Buy 
America requirements for manufactured products, allowing foreign 
products to be purchased even when domestic ones are available. FHWA 
does not intend to disrupt the progress of projects but also does not 
intend to continue to allow the Manufactured Products General Waiver 
continue longer than needed; FHWA believes that allowing Federal-aid 
projects that have FHWA financial assistance obligated for construction 
before the start dates of this final rule provides an appropriate 
middle ground.

Compliance

    Comments: In the NPRM, FHWA stated that it was not proposing any 
required method of compliance to ease the burden that tracking the 
origin and cost of components may pose. FHWA requested comment on any 
specific provisions that it should consider in easing the 
administrative burden in demonstrating compliance with the Buy America 
requirements for manufactured products.
    Many commenters nonetheless indicated that they desired FHWA to 
specifically clarify what constitutes compliance, such as what level of 
detail is required to prove compliance and what penalties FHWA could 
bring about in cases of noncompliance. These commenters further 
suggested that FHWA should clearly state who is responsible for 
tracking and providing information on the compliance of manufactured 
products. One commenter, however, agreed with FHWA that not prescribing 
any specific method of compliance will ease administrative burden.
    Commenters desiring FHWA to clarify a specific method of compliance 
suggested various possible methods. One commenter suggested that FHWA 
should allow recipients of FHWA financial assistance to rely on a fair 
inference that a manufactured product meets Buy America requirements, 
such as by relying on a certification, absent material evidence to the 
contrary. Other suggested that FHWA should clarify that a certification 
from a contractor or manufacturer would demonstrate compliance. Some 
commenters also suggested that FHWA itself should provide certification 
forms. Other commenters went further, suggesting that FHWA should 
itself certify manufactured products as compliant or develop a list of 
manufactured products that are compliant with its standards. Finally, 
some commenters stated that once a product in a product line is 
certified as compliant, that certification should cover other products 
from that product line for a certain period of time.
    FHWA Response: After analyzing the comments received on this topic, 
FHWA believes that commenters did not indicate that they desired FHWA 
to prescribe a specific form of compliance but rather sought 
clarification on what might constitute compliance. While not

[[Page 2946]]

prescribing any form of compliance, FHWA believes that the manufacturer 
will be in the best position to certify that a specific product meets 
these requirements. FHWA notes, however, that recipients of FHWA 
financial assistance are ultimately responsible for compliance with 
FHWA's Buy America requirements. FHWA therefore believes that the 
recipient is in the best position to determine the best form of any 
certification.
    Due to the nature of the Buy America requirements for manufactured 
products, each product's compliance must be determined individually. 
Given that the compliance of products might change, FHWA does not 
believe that it is in a position to certify compliance or have a list 
of compliant products; a product from one product line may be compliant 
at one point and that same product may then become non-compliant later 
in a different product line based on choices made by the manufacturer. 
Any certification from FHWA would only provide a brief snapshot of a 
specific manufactured product, which would be minimally helpful for 
other parties seeking to procure similar products. FHWA instead 
believes that it is more appropriate for parties to consult with 
product manufacturers, who are in the best position to provide current 
information on the compliance of their products.
    In determining the proper remedy for resolving an after-the-fact 
discovery of the incorporation of noncompliant manufactured products, 
FHWA intends to follow the same process as it does for determining the 
remedy for a discovery of the incorporation of noncompliant iron or 
steel. FHWA will review relevant information to determine the 
appropriate resolution, which may include removing the noncompliant 
products, making the noncompliant products non-participating, or 
determining that all project costs are ineligible.\22\
---------------------------------------------------------------------------

    \22\ See Q#48 of FHWA's Buy America Q and A for Federal-aid 
Program for more information: https://www.fhwa.dot.gov/construction/contracts/buyam_qageneral.cfm.
---------------------------------------------------------------------------

Scope of Buy America Requirements

    Comments: In the NPRM, FHWA noted that 23 U.S.C. 313(h) requires 
FHWA's Buy America requirements to apply to all contracts that are 
eligible for FHWA assistance, regardless of the funding source for the 
specific contracts, if any contract within the scope of a finding, 
determination, or decision under the National Environmental Policy Act 
(NEPA) is funded with amounts made available to carry out title 23, 
U.S.C. In the NPRM, FHWA stated that because of this provision, were 
FHWA to rescind the Manufactured Products General Waiver and impose Buy 
America requirements for manufactured products, those Buy America 
requirements would apply to all contracts eligible for FHWA financial 
assistance for a project carried out within the scope of the applicable 
finding, determination, or decision under NEPA so long as one contract 
for the project is funded with amounts made available to carry out 
title 23, U.S.C.
    Commenters expressed confusion over the scope of FHWA's Buy America 
requirements under 23 U.S.C. 313(h) versus BABA's domestic content 
procurement preferences. For instance, commenters suggested that 
certain manufactured products are not used in infrastructure projects 
or are not integral to the construction of an infrastructure project 
and therefore should not be covered by any Buy America requirements. 
Commenters representing utility companies in particular argued that 
FHWA's Buy America requirements for manufactured products should not 
apply to utility relocations, stating that the utility relocation is 
not an infrastructure project, that the utility company does not 
receive any Federal funds for the relocation but is only reimbursed for 
its costs, and that the involvement of the utility company in the 
project is involuntary.
    Other commenters, particularly those involved in the electric 
vehicle (EV) charging industry, expressed confusion over how 23 U.S.C. 
313(h) functions if the NEPA determination is a categorical exclusion 
(CE). These commenters suggested that 23 U.S.C. 313(h) would require 
them to seek a NEPA determination on a project's scope, even though the 
project is an approved CE, to determine the applicability of Buy 
America requirements.
    FHWA Response: FHWA wishes to clarify that 23 U.S.C. 313(h) 
represents a unique Buy America provision that is exclusive to FHWA. 
This provision applies to FHWA's Buy America statute, not other 
domestic content procurement preferences, such as those in BABA; thus, 
FHWA's Buy America requirements will be different from those applied by 
other Federal agencies.
    Under 23 U.S.C. 313(h), FHWA's Buy America requirements, including 
its Buy America requirement for manufactured products, apply not just 
to the Federal-aid project itself but also to contracts under the scope 
of the applicable NEPA finding, determination, or decision. This means 
that a manufactured product does not need to be integral to the 
Federal-aid project itself to be subject to FHWA's Buy America 
requirements. For instance, with respect to FHWA's existing Buy America 
requirements for iron and steel, FHWA has long made clear that 23 
U.S.C. 313(h) requires that all utility work eligible for FHWA 
financial assistance must meet its Buy America requirements for iron 
and steel, even if FHWA does not fund the utility work.\23\ Given that 
23 U.S.C. 313(h) applies to manufactured products to the same extent as 
it does to iron and steel, FHWA thus believes that it is clear that 
these new requirements will similarly apply to all utility work 
eligible for FHWA financial assistance. In other words, a manufactured 
product must comply with the Buy America requirements if it is 
permanently incorporated into the Federal-aid project or if it is 
permanently incorporated as part of work done under a contract within 
the scope of the applicable NEPA finding, determination, or decision of 
a Federal-aid project and is eligible for FHWA financial assistance. 
FHWA discusses the issue of permanent incorporation in more detail 
below when discussing the introductory text to Sec.  635.410(c).
---------------------------------------------------------------------------

    \23\ https://www.fhwa.dot.gov/utilities/buyam.cfm.
---------------------------------------------------------------------------

    With respect to commenters raising concerns about the applicability 
of CEs to 23 U.S.C. 313(h), FHWA notes that a CE is a form of a NEPA 
finding, determination, or decision. FHWA would not require or believe 
it necessary for a party to seek a further NEPA determination after 
obtaining an approved CE solely for the purpose of determining the 
extent of Buy America requirements under 23 U.S.C. 313(h). The CE 
itself would dictate the scope; all contracts eligible for FHWA 
financial assistance under the scope of the CE would need to comply 
with FHWA's Buy America requirements if one such contract received 
Federal-aid funding.

V. Section-by-Section Discussion

Section 635.410(b)--Recipient

    Comments: FHWA proposed to remove the word ``State'' in existing 
Sec.  635.410(b)(2) and (3) and (d) and replace it with the word 
``recipient.'' FHWA also proposed to use the word ``recipient'' 
throughout Sec.  635.410(c). One commenter requested that FHWA provide 
a definition of the word ``recipient,'' stating that it was unclear 
whether this term referred to the contracting agency, contractor, 
manufacturer, or a combination of such entities.

[[Page 2947]]

    FHWA Response: For the purpose of the final rule, the word 
``recipient'' in Sec.  635.410(b), which discusses FHWA's Buy America 
requirements for iron and steel, refers to the recipient of FHWA 
financial assistance. The change to ``recipient'' in Sec.  635.410(b) 
and (d) from ``State'' is simply meant to reflect that rather than 
providing funds to States, FHWA also provides discretionary grant funds 
directly to other entities, such as local governments and metropolitan 
planning organizations. In addition, FHWA notes that its current Buy 
America requirements apply to Territorial governments, who receive 
funding from FHWA through the Territorial Highway Program under 23 
U.S.C. 165(c). The definition of ``State'' for purposes of Sec.  
635.410 does not include such Territories, even though such Territories 
are subject to the same Buy America requirements as States. See 23 CFR 
635.403(f); 23 U.S.C. 101(a)(28). In making this change, FHWA does not 
intend to change the existing practice as it currently applies to 
States.

Section 635.410(b)--Iron or Steel Products

    Comments: FHWA proposed to maintain its existing Buy America 
requirements for steel and iron found in Sec.  635.410(b), with the 
only change being replacing references to ``steel and iron materials'' 
and ``steel or iron materials'' with the phrase ``iron or steel 
products.'' FHWA further proposed to define ``iron or steel products'' 
in Sec.  635.410(c)(1)(iii). This change was meant to create a 
distinction between the category of iron and steel materials and 
manufactured products that may contain iron and steel. FHWA discusses 
the effect of this change in further detail when discussing Sec.  
635.410(c)(2) below.
    With respect to the requirements in Sec.  635.410(b), FHWA received 
several comments on Sec.  635.410(b)(4), which allows for a de minimis 
amount of foreign iron and steel to be used in Federal-aid projects. 
Under this provision, foreign iron and steel can be used in a Buy 
America-compliant project if the cost of such materials does not exceed 
0.1 percent of the total contract cost or $2,500, whichever is greater. 
Commenters expressed confusion over how this de minimis provision would 
apply to manufactured products and how it is connected with the 
departmental de minimis waiver. Other commenters suggested changes to 
the de minimis provision in Sec.  635.410(b)(4), such as by setting a 
total contract cost above the current $2,500 figure. Other commenters 
argued that FHWA should codify the departmental de minimis waiver in 
the regulatory text, similar to how the de minimis provision is 
currently codified at Sec.  635.410(b)(4).
    In addition, one commenter stated that the proposed language in 
Sec.  635.410(b)(1)(ii), that all manufacturing processes for iron or 
steel products must occur in the United States, could suggest that all 
manufacturing processes for components of the products that are not 
made of iron or steel must be domestically produced. This commenter 
suggested modifying the language to state that ``if iron or steel 
products are to be used, all manufacturing processes of the iron or 
steel components, including application of a coating, for these 
materials must occur in the United States.''
    FHWA Response: FHWA is clarifying that Sec.  635.410(b)(4) only 
applies to iron or steel products; it does not apply to materials 
properly classified as manufactured products under Sec.  
635.410(c)(1)(iv). The de minimis provision applicable to manufactured 
products is found in the departmental de minimis waiver. Other comments 
discussing changes to existing Sec.  635.410(b)(4) or codifying the 
departmental de minimis waiver in Sec.  635.410 are beyond the scope of 
this rulemaking.
    With respect to changes made to Sec.  635.410(b)(1)(ii), FHWA notes 
that the current language states that all manufacturing processes for 
steel or iron materials must occur in the United States. FHWA does not 
intend for its change in language, from ``steel or iron materials'' to 
``iron or steel products'' to change the scope of the requirements in 
Sec.  635.410(b)(1)(ii) with respect to the category of iron or steel 
products. The intent is for FHWA's current Buy America steel and iron 
requirements, codified in Sec.  635.410(b), to continue to apply to all 
steel and iron in a product classified as an iron or steel product. The 
only functional change FHWA is making in Sec.  635.410(b)(1)(ii) is to 
distinguish between iron or steel products and manufactured products 
that contain iron and steel. FHWA also notes that the language used in 
Sec.  635.410(b)(1)(ii) substantially mirrors the language used in 2 
CFR 184.3 to determine when an iron or steel product is manufactured in 
the United States.

Existing Sec.  635.410(c)

    Comments: In the NPRM, FHWA proposed to replace the current Sec.  
635.410(c), which discusses the process for requesting Buy America 
waivers and the procedures FHWA will take to respond to that request, 
with a new paragraph detailing FHWA's Buy America requirements for 
manufactured products.
    FHWA received multiple comments expressing concern with removing 
existing Sec.  635.410(c). Commenters stated their reservations with 
this approach, arguing that it appeared FHWA was removing the ability 
for recipients of FHWA financial assistance to request Buy America 
waivers. These commenters also indicated that FHWA should codify its 
waiver process in its Buy America regulation, similar to how it is done 
by OMB in 2 CFR 184.7. Other commenters also expressed dissatisfaction 
with FHWA's current Buy America waiver process and suggested what they 
viewed as potential solutions.
    FHWA Response: FHWA did not intend for removing current Sec.  
635.410(c) to remove the ability for recipients of FHWA financial 
assistance to request Buy America waivers. The authority for recipients 
to request waivers is found in 23 U.S.C. 313(b), and FHWA is not 
altering, nor could it alter, that ability through this rule. As stated 
in the NPRM, FHWA made the choice to remove existing Sec.  635.410(c) 
because the current provision is out of date and does not reflect 
FHWA's current statutory requirements regarding waivers, FHWA's current 
organizational structure, or FHWA's current procedure for processing 
waivers. FHWA believes that recipients of FHWA financial assistance 
understand the current Buy America waiver process and therefore does 
not believe that codifying this process is necessary.
    FHWA also notes that comments on modifying its current waiver 
process are out of the scope of this rulemaking.

Section 635.410(c)--Introductory Text

    Comments: In Sec.  635.410(c), FHWA proposed to state that 
manufactured products used and permanently incorporated in Federal-aid 
highway construction projects must be produced in the United States. 
Commenters, particularly those representing the utility industry, 
questioned what it meant for a manufactured product to be permanently 
incorporated into a Federal-aid project. These commenters argued that 
utility infrastructure that is being relocated, replaced, or modified 
does not become a permanent part of the Federal-aid project because it 
is being relocated, replaced, or modified only to accommodate project 
construction. Other commenters also suggested that FHWA should clarify 
that its Buy America requirements do not apply to existing in-use 
equipment.

[[Page 2948]]

    FHWA Response: FHWA chose the language used in Sec.  635.410(c) for 
FHWA's Buy America requirements for manufactured products to align with 
the language currently in Sec.  635.410(b)(1)(i) regarding FHWA's Buy 
America requirements for steel and iron. FHWA intends for the standard 
for permanent incorporation of manufactured products to be the same as 
FHWA currently uses to determine whether steel and iron is permanently 
incorporated. In other words, FHWA would apply its Buy America 
requirements to iron, steel, and manufactured products permanently 
incorporated into Federal-aid projects. The requirements do not apply 
to steel, iron, or manufactured products used on a temporary basis on 
Federal-aid projects, meaning when contract specifications provide that 
the iron, steel, and manufactured products used on the project either 
must be removed at the end of the project or may be removed at the 
contractor's convenience. FHWA believes that continuation of this 
current policy, along with the discussion of 23 U.S.C. 313(h) above, 
should provide the necessary guidance on whether the relocation, 
replacement, or modification of utilities constitutes permanent 
incorporation of the products. In short, any contract or agreement 
involving utility work that uses any amount of Federal-aid Highway 
Program funding must comply with FHWA's Buy America requirements, 
including the new requirement for manufactured products.\24\
---------------------------------------------------------------------------

    \24\ See https://www.fhwa.dot.gov/utilities/buyam.cfm for more 
information on the application of Buy America requirements to 
utility work on projects.
---------------------------------------------------------------------------

    In terms of applicability of the Buy America requirements to 
manufactured products to existing in-use equipment, FHWA also notes 
that the final assembly requirement will apply to all Federal-aid 
projects obligated on or after October 1, 2025, and the 55 percent 
requirement will apply to all Federal-aid projects obligated on or 
after October 1, 2026. Where FHWA's Buy America requirements for 
manufactured products apply, all permanently incorporated manufactured 
products must be produced in the United States.

Section 635.410(c)(1)(ii)--Excluded Materials

    Comments: In the NPRM, FHWA defined ``excluded materials'' as 
``section 70917(c) materials as defined in 2 CFR 184.3.'' Under 2 CFR 
184.3, ``section 70917(c) materials'' are defined as ``cement and 
cementitious materials; aggregates such as stone, sand, or gravel; or 
aggregate binding agents or additives.'' Commenters suggested that FHWA 
should, instead of cross-referencing to 2 CFR 184.3, provide a 
definition of the terms ``aggregates,'' ``aggregate binding agents,'' 
and ``additives'' in the regulatory text of Sec.  635.410.
    FHWA Response: As noted in the NPRM, section 70917(c) of BABA does 
not explicitly comment on whether excluded materials could be 
considered manufactured products. By providing a definition of excluded 
materials and then stating in the definition of manufactured products 
that excluded materials cannot be manufactured products, FHWA seeks to 
make clear, in alignment with 2 CFR part 184, that excluded materials 
are not, standing alone, manufactured products. As stated in more 
detail below when discussing Sec.  635.410(c)(1)(iv), FHWA believes 
that excluded materials may nonetheless constitute components of 
manufactured products when combined with other materials, including 
other excluded materials, to create a manufactured product. In other 
words, excluded materials may be standalone materials, and this not 
subject to FHWA's Buy America requirements for manufactured products, 
or components of manufactured products, and thus the manufactured 
product would be subject to the final assembly and 55 percent 
requirement. For manufactured products containing excluded materials as 
components, the excluded material must be considered in determining 
whether the manufactured product has more than 55 percent of its 
components, by cost, produced in the United States.
    In terms of determining whether an excluded material is itself not 
a manufactured product, FHWA views an aggregate as a broad category of 
particulate matter, such as stone, sand, or gravel. FHWA views 
aggregate binding agents as materials used to bind together small 
aggregates, and FHWA views additives as materials added to other 
materials to improve their properties. FHWA, however, does not believe 
that a definition more specific than this is necessary for the purpose 
of this rulemaking; FHWA doubts that aggregates, aggregate binding 
agents, or additives will generally be considered standalone 
manufactured products. If such outlier cases occur, FHWA believes they 
are more appropriately dealt with on a case-by-case basis or through 
the issuance of future guidance.

Section 635.410(c)(1)(iii), (vi)--Iron or Steel Products

    Comments: In the NPRM, FHWA defined ``iron or steel products'' as 
articles, materials, or supplies that consist wholly or predominantly 
of iron or steel or a combination of both. FHWA further defined 
``predominantly of iron or steel or a combination of both'' as a 
material where the cost of the iron and steel content exceeds 50 
percent of the total cost of all its components. Both of these 
definitions mirror the definitions of the terms in 2 CFR part 184.
    Commenters raised concerns regarding the difficulty in evaluating 
the steel and iron content of products to determine whether those 
products would be considered manufactured products, and subject to the 
new Buy America requirements for manufactured products, or iron or 
steel products, and subject to the existing Buy America requirements 
for iron and steel. These commenters suggested that it may be difficult 
for recipients of FHWA financial assistance to determine the cost of 
the iron and steel content of a product. One commenter suggested that 
FHWA allow recipients to use another metric, such as weight percentage, 
to determine how to classify a product, arguing that determining the 
weight of iron and steel in a product is easier to determine than the 
cost of the iron and steel.
    FHWA Response: FHWA believes that adopting a definition that 
distinguishes between iron or steel products and manufactured products 
that contain iron or steel is important to allow contracting agencies, 
contractors, and manufacturers to understand which requirements apply 
to a given material. FHWA acknowledges that recipients of FHWA 
financial assistance may need to consult with manufacturers to 
determine the cost of a product's iron or steel content. FHWA, however, 
believes that using the standard proposed, which is the standard under 
BABA and 2 CFR part 184, provides a single standard that applies to 
iron or steel products across Federal agencies; this is important to 
provide certainty to contracting agencies, contractors, and 
manufacturers regarding the requirements that apply to a given material 
no matter the Federal agency that is funding the procurement of the 
material.

Section 635.410(c)(1)(iv)--Distinguishing Manufactured Products From 
Other Materials

    Comments: In the NPRM, FHWA proposed to define a manufactured 
product as an article, material, or supply that has been processed into 
a specific form and shape, or combined with other articles, materials, 
or supplies to create a product with different properties than the 
individual articles, materials, or

[[Page 2949]]

supplies. FHWA noted, however, that if an item is classified as an iron 
or steel product, an excluded material, or other product category as 
specified by law or in 2 CFR part 184, it should not be classified as a 
manufactured product.
    Commenters expressed confusion about what materials should be 
classified as manufactured products, with one commenter requesting FHWA 
to clarify whether FHWA's definition meant that a manufactured product 
included all permanent materials or products incorporated into a 
project outside of the categories specifically listed in the 
definition. Other commenters requested for FHWA to specifically state 
that certain materials are not manufactured products and therefore not 
subject to FHWA's Buy America requirements. One commenter requested 
clarity on the meaning of FHWA's statement in the preamble to the NPRM 
that ``products brought to the work site in an unprocessed or minimally 
processed state, such as topsoil, compost, and seed, would not be 
considered manufactured products'' and that ``non-manufactured or raw 
materials mixed off of the work site with other non-manufactured or raw 
materials of similar types would not necessarily result in the mixed 
material brought to the work site being classified as a manufactured 
product if it remains in an unprocessed or minimally processed state, 
such as minimally-processed fill dirt.''
    Other commenters requested that FHWA provide clarity on 
distinguishing between manufactured products and construction 
materials. Certain commenters requested that FHWA specifically classify 
specific products as either a manufactured product or a construction 
material. Commenters in particular raised concerns over how to classify 
construction materials that have articles, materials, supplies, or 
binding agents added to them, as the definition of ``construction 
material'' in 2 CFR 184.3 states that minor additions of articles, 
materials, supplies, or binding agents to a construction material do 
not change the categorization of the combined material as a 
construction material. Such commenters requested that FHWA define when 
a construction material has minor additions and should be classified as 
a construction material versus when a construction material has non-
minor additions and should be classified as a manufactured product. One 
commenter requested that FHWA provide a list of manufactured products 
that include construction materials that have undergone non-minor 
additions for this purpose. Other commenters requested that FHWA 
clearly state that a product that is a combination of two construction 
materials should be classified as a manufactured product, not a 
construction material.
    FHWA Response: The definition of ``manufactured product'' has two 
steps. First, to be a manufactured product, the material must either 
(1) be processed into a specific form and shape; or (2) combined with 
other articles, materials, or supplies to create a product with 
different properties than the individual articles, materials, or 
supplies. Like OMB, FHWA finds it necessary to have a positive 
definition for what constitutes a ``manufactured product.'' For 
example, FHWA would not classify a raw material as a manufactured 
product because it is not manufactured under FHWA's meaning of the 
term. Raw materials are not (1) processed into a specific form and 
shape; or (2) combined with other articles, materials, or supplies to 
create a product with different properties than the individual 
articles, materials, or supplies.
    In terms of determining whether a material is processed into a 
specific form and shape, FHWA wishes to make clear that some materials, 
like raw materials, are not processed into a specific form and shape. 
Alternatively, some products may exist in such a minimally processed 
state that they should not be considered ``processed into a specific 
form and shape,'' such as topsoil, which should not be considered a 
manufactured product.
    For the purpose of determining whether a material is combined with 
other articles, materials, or supplies to create a product with 
different properties than the individual articles, materials, or 
supplies, FHWA clarifies that some materials may be combined with other 
materials but produce a product that lacks different properties than 
the individual materials. For example, a mixture of raw materials in an 
unprocessed or minimally processed state, such as minimally processed 
fill dirt, should not be classified as a manufactured product because 
the fill dirt does not have different properties than its individual 
components.
    In short, some materials may not be classified as a manufactured 
product under this first step. A material properly classified as a 
manufactured product under this first step is then analyzed under the 
second step of the definition. Under this second step, a material is 
excluded from classification as a manufactured product if it could also 
be classified as an iron or steel product, an excluded material, or 
other product category as specified by law or in 2 CFR part 184. Except 
for a specific subset of products discussed in Sec.  635.410(c)(2)(i) 
and (ii), below, FHWA intends for materials to be classified as only 
one category of material and, based on that classification, only 
subject to one set of requirements, as applicable to the 
classification.
    FHWA recognizes that without this second step, certain materials 
could be viewed as both manufactured products under the first step and 
as another category, which would make it unclear what requirements 
applied to that material. For instance, a material could be considered 
a manufactured product under the first step of the definition but also 
contain such a high amount of iron and steel to be considered an iron 
or steel product, such as might be the case for some vehicles. This 
second step makes clear that such a material is properly classified as 
an iron or steel product and subject to FHWA's Buy America requirements 
for iron and steel under Sec.  635.410(b), not FHWA's Buy America 
requirements for manufactured products under Sec.  635.410(c).\25\ 
Similarly, a material that falls under the definition of an excluded 
material could also be considered a manufactured product under the 
first step of the definition of ``manufactured product,'' such as 
cement. Again, in such a case, such a material would be properly 
classified as an excluded material, not a manufactured product. As 
excluded materials are not subject to any Buy America requirements 
standing alone, such a material would not have any domestic content 
procurement preference placed on it. To use another example, certain 
materials classified as construction materials under 2 CFR 184.3 could 
also be considered a manufactured product under the first step of the 
definition of ``manufactured product,'' such as fiber optic cable. Once 
more, such a material is properly classified as a construction material 
and is subject to BABA's construction material requirements under 2 CFR 
part 184, not FHWA's Buy America requirements for manufactured 
products.
---------------------------------------------------------------------------

    \25\ This rule applies generally to manufactured products. FHWA 
discusses the specific exceptions to it below when discussing Sec.  
635.410(c)(2)(i) and (ii).
---------------------------------------------------------------------------

    FHWA acknowledges that, to determine whether a material should be 
classified as a construction material or manufactured product during 
this step two, parties need to understand the definition of what 
constitutes a construction material in 2 CFR 184.3. Per 2 CFR 184.3, a 
construction material is an article, material, or supply that consists 
of only one of the following

[[Page 2950]]

eight items: non-ferrous metals; plastic and polymer-based products 
(including polyvinylchloride, composite building materials, and 
polymers used in fiber optic cables); glass (including optic glass); 
fiber optic cable (including drop cable); optical fiber; lumber; 
engineered wood; or drywall. In addition, these eight materials may 
have minor additions of articles, materials, supplies, or binding 
agents added to them and remain properly categorized as a construction 
material. In discussing minor additions in 2 CFR part 184, OMB did not 
provide a specific definition but instead stated that ``Federal 
agencies should exercise reasonable discretion in applying this term 
within their respective Federal financial assistance programs for 
infrastructure.'' 88 FR 57767. FHWA does not believe that this 
rulemaking, which concerns FHWA's requirements for manufactured 
products under 23 U.S.C. 313, is the proper place to define what 
constitutes non-minor additions for the purpose of determining whether 
a material should be considered a construction material; if necessary, 
FHWA would instead seek to do so through additional guidance.
    FHWA notes that a material properly classified as a manufactured 
product under this two-step definition may include components that, on 
their own, would be categorized as iron or steel products, excluded 
materials, construction materials, or other categories of products. 
FHWA emphasizes that it is the classification of the material itself 
that determines whether it is a manufactured product versus an iron or 
steel product, excluded material, or construction material. For 
example, a traffic light may contain iron and steel components and 
glass, a construction material, as a component. In determining how to 
classify the traffic light, the first step is to determine whether the 
traffic light is processed into a specific form and shape or combined 
with other articles, materials, or supplies to create a product with 
different properties than the individual articles, materials, or 
supplies. The second step is to determine whether the traffic light 
itself should be classified as an iron or steel product, excluded 
material, or other product category as specified by law or in 2 CFR 
part 184. The fact that components of the traffic light might be iron 
or steel products or construction materials may be relevant to 
determining the proper classification of the traffic light; for 
example, if the iron or steel components represent more than 50 percent 
of the cost of all the traffic light's components, the traffic light 
should be classified as an iron or steel product. It is important to 
note, however, that merely containing such iron or steel components and 
construction materials as components does not mean that the traffic 
light is automatically classified as an iron or steel product or a 
construction material. This determination must be made by looking at 
the specific definition applicable to each category of material.
    If a material meets the definition of a manufactured product under 
the first step and is not excluded under the second step, it is 
properly classified as a manufactured product, unless it is a mixture 
of excluded materials delivered to a work site without final form for 
incorporation into a project, as discussed below in the analysis of 
Sec.  635.410(c)(1)(iv). FHWA reiterates, however, that a material 
properly classified as a manufactured product is only subject to FHWA's 
Buy America requirements for manufactured products if the material is 
permanently incorporated into a Federal-aid project.
    FHWA believes that this guidance should allow contracting agencies, 
contractors, and manufacturers to properly determine the proper 
classification of articles, materials, and supplies.

Section 635.410(c)(1)(iv)--Excluded Materials

    Comments: Under FHWA's definition of a manufactured product, 
discussed in detail above, an excluded material, by itself, should not 
be classified as a manufactured product. FHWA stated in the NPRM, 
however, in alignment with 2 CFR part 184, that excluded materials may 
constitute a component of a manufactured product when combined with 
other materials, including other excluded materials. If a manufactured 
product contains components that are excluded materials, those excluded 
materials must be considered in determining whether 55 percent of the 
product's components, by cost, are produced in the United States. FHWA 
once again, notes, however, that mixtures of excluded materials 
delivered to a work site without final form for incorporation into a 
project are not considered manufactured products; comments on this 
topic are discussed in detail below.
    Some commenters expressed opposition to having a combination of 
excluded materials be classified as a manufactured product. Others 
expressed opposition to applying a Buy America requirement to excluded 
materials in any form. One commenter requested that FHWA should make it 
clear in the final rule that excluded materials do not have a Buy 
America requirement placed on them.
    FHWA Response: FHWA clarifies that, consistent with 2 CFR part 184, 
an individual item listed in section 70917(c) of BABA that is brought 
to the work site for permanent incorporation into a Federal-aid project 
should be classified as an excluded material and not subject to a Buy 
America requirement. For example, cement brought to the work site for 
permanent incorporation into a Federal-aid project is not subject to 
FHWA's Buy America requirements. If the individual excluded material is 
combined with another excluded material, such as cement combined with 
aggregates, that combined material should be considered to be a 
manufactured product, assuming that it means the definition of a 
manufactured product in Sec.  635.410(c)(1)(iv). In this case, each 
excluded material (the cement and aggregates) is a component of the 
manufactured product and must be considered when determining whether 55 
percent of the components, by cost, of the product are produced in the 
United States. On the other hand, an excluded material combined with 
the same excluded material would remain an excluded material and not be 
subject to FHWA's Buy America requirements. In short, a Buy America 
preference may apply to excluded materials as a component of a 
manufactured product; it cannot apply to an excluded material standing 
alone.
    FHWA agrees with OMB that the language in section 70917(c) of BABA 
indicates that Congress did not intend for excluded materials to be 
considered construction materials and did not intend excluded 
materials, standing alone, to be classified as manufactured products. 
See 88 FR 57771-73. In addition, FHWA agrees with OMB that section 
70917(c) does not prevent excluded materials from being components of 
manufactured products and considered the same as any other component of 
a manufactured product. See id. at 57772. FHWA further believes that it 
is useful to align the treatment of excluded materials under FHWA's Buy 
America requirements with the requirements of these materials under 2 
CFR part 184 where appropriate. FHWA believes that this promotes 
uniformity for contracting agencies, contractors, and manufacturers 
operating between different Federal Agency programs and will allow for 
these entities to build up a greater amount of experience with these 
requirements.

[[Page 2951]]

Section 635.410(c)(1)(iv)--Reference to Construction Materials

    Comments: In the definition of manufactured product, FHWA stated 
that: ``If an item is classified as an iron or steel product, an 
excluded material, or other product category as specified by law or in 
2 CFR part 184, then it is not a manufactured product.'' Many 
commenters suggested that FHWA should remove the reference to ``other 
product category as specified . . . in 2 CFR part 184'' and instead 
just list the specific construction materials referenced in 2 CFR part 
184.
    FHWA Response: Pursuant to section 70915(b) of BABA, OMB is given 
the authority to determine which construction materials are covered by 
BABA's requirements and to define the manufacturing processes that must 
occur in the United States for those construction materials. As stated 
above, except for specific products, described in more detail in the 
discussion of Sec.  635.410(c)(2)(i) and (ii), below, FHWA believes 
that materials should be classified as only one category of material 
and, based on that classification, be subject to only one set of 
requirements, as applicable to the classification. The purpose of 
referring to ``other product category as specified by law or in 2 CFR 
part 184'' is to make clear that products that could be classified as 
both another category and a manufactured product should not be 
considered manufactured products and are not subject to FHWA's Buy 
America requirements for manufactured products. Thus, items classified 
as construction materials by OMB are not properly classified as 
manufactured products and are not subject to FHWA's Buy America 
requirements for manufactured products. Given that OMB has the 
authority to define construction materials and thereby impose BABA's 
construction material requirements on them, FHWA does not find it 
appropriate to separately list construction materials in its own 
regulation.

Section 635.410(c)(1)(iv)--Mixtures of Concrete or Asphalt Delivered to 
a Job Site Without Final Form

    Comments: In the definition of manufactured products in the NPRM, 
FHWA stated that ``[m]ixtures of concrete or asphalt delivered to a job 
site without final form for incorporation into a project are not a 
manufactured product.'' Many commenters stated that FHWA should clarify 
that this exception should apply to all mixtures of excluded materials, 
not just mixtures of concrete or asphalt. Other commenters suggested 
that FHWA should reference a ``work site'' instead of a ``job site,'' 
given that Sec.  635.410(c)(2) stated that classification of a material 
should occur based on its status at the time it is brought to the work 
site for incorporation into an infrastructure project. Still other 
commenters disagreed, stating that FHWA should clarify that the 
exemption should apply to mixtures delivered to or proximate to a work 
site. Finally, some commenters opposed treating mixtures of concrete or 
asphalt without final form from those that are in a settled form, 
contesting that there is no reason to treat the two differently.
    FHWA Response: In the preamble to 2 CFR part 184, OMB stated: ``In 
the case of section 70917(c) materials, OMB clarifies . . . to the 
extent that section 70917(c) materials were only combined as an 
unsettled mixture without final form when reaching the work site, such 
as in the case of wet concrete or hot mix asphalt, the unsettled 
mixture should not be considered a manufactured product.'' 88 FR 57772. 
In the NPRM, FHWA stated its agreement with OMB on this topic and that 
FHWA intended for its proposed regulations to have the same reach as 2 
CFR part 184 in this respect.
    FHWA disagrees with commenters suggesting that settled mixtures of 
excluded materials should not be considered manufactured products like 
FHWA proposed for unsettled mixtures of excluded materials. FHWA agrees 
with OMB that unsettled mixtures are not processed into a specific 
shape or form like settled mixtures. Id. While settled mixtures may 
have different properties than individual excluded materials, FHWA 
agrees with OMB that it is more appropriate to only treat excluded 
materials that have set or dried into a particular shape or form prior 
to reaching the work site as manufactured products. FHWA also notes 
that aligning its Buy America requirements with the BABA requirements 
in 2 CFR part 184 will promote uniformity and allow contracting 
agencies, contractors, and manufacturers that work with different 
Federal agencies a greater ability to increase their knowledge of how 
these requirements work.
    FHWA does agree with commenters that the language in the final rule 
should better reflect the intent of OMB. For this reason, FHWA believes 
it appropriate to modify its regulatory text to make clear that this 
exception applies to all mixtures of excluded materials without final 
form. FHWA also agrees that it is appropriate to reference a ``work 
site'' instead of a ``job site,'' given that is the language used by 
OMB and the language included in Sec.  635.410(c)(2). FHWA intends the 
use of ``work site'' in Sec.  635.410(c)(1)(iv) to mirror the use of 
``work site'' in Sec.  635.410(c)(2). Thus, the work site is generally 
the location of the infrastructure project at which the mixture will be 
incorporated; however, there may be circumstances where it is more 
appropriate for the work site to be considered to be broader than the 
location of the infrastructure project. As the definition of the work 
site will depend on the specific project and material being delivered, 
FHWA does not believe it necessary to state that the mixtures can be 
delivered proximate to a work site.

Section 635.410(c)(1)(vii)--Produced in the United States

    Comments: In the NPRM, FHWA defined when a manufactured product was 
``produced in the United States'' and thereby when a manufactured 
product would be compliant with FHWA's Buy America requirements. FHWA 
proposed to adopt the definition of ``produced in the United States'' 
found in section 70912(6)(B) of BABA, which would require a 
manufactured product be manufactured in the United States and the cost 
of components of the manufactured product that are mined, produced, or 
manufactured in the United States be greater than 55 percent of the 
total cost of all components of the manufactured product. FHWA stated 
in the NPRM that it believed it was required by BABA to adopt general 
standards that meet or exceed those under BABA. Further, FHWA stated in 
the NPRM that it was proposing to choose requirements similar to BABA's 
manufactured product requirements to minimize the burden placed on 
contracting agencies, contractors, and manufacturers. FHWA also stated 
that aligning its Buy America requirements for manufactured products 
with those applicable to manufactured products under BABA would provide 
consistency between the two regimes.
    Some commenters noted the benefit of aligning FHWA's Buy America 
requirements for manufactured products with BABA's domestic content 
procurement preference for manufactured products, with one manufacturer 
stating that similar standards would enable it to use the same 
compliant products in projects subject to BABA and FHWA's Buy America 
statute. Other commenters suggested various other methods for FHWA to 
determine when a manufactured product is ``produced in the United 
States.'' One commenter stated that the requirements should vary based 
on product or product type.

[[Page 2952]]

Others suggested that FHWA should allow products to be sourced from 
countries for which the United States has trade agreements. One 
commenter argued that FHWA should remove the 55 percent requirement 
altogether.
    Other commenters sought clarification over how to determine whether 
a manufactured product was produced in the United States under FHWA's 
proposed standards. Commenters questioned how to determine when a 
product was manufactured in the United States for the purpose of the 
final assembly requirement. Commenters also sought clarification on how 
to determine if a component was mined, produced, or manufactured in the 
United States for the purpose of meeting the 55 percent requirement.
    FHWA Response: FHWA believes its Buy America requirements for 
manufactured products must meet or exceed those under BABA pursuant to 
section 70917(a) and (b) of BABA, that choosing requirements meeting 
BABA's is the minimally burdensome option, and that doing so allows for 
the benefit of consistency between projects subject to FHWA's Buy 
America requirements and those subject to BABA.
    With respect to what it means for a product to be manufactured in 
the United States, and what it means for a component to be mined, 
produced, or manufactured in the United States, FHWA intends for the 
requirements to reflect the same principles found in BABA and the 
Federal Acquisition Regulation (FAR). FHWA intends to issue further 
guidance on these topics in the future. FHWA notes, however, that the 
manufactured and 55 percent requirements apply to the manufactured 
product itself, not the components of a manufactured product. For 
example, a component of a manufactured product does not need more than 
55 percent of its components--the subcomponents of the manufactured 
product -by cost, to be mined, produced, or manufactured in the United 
States.

Section 635.410(c)(2)--Buy America Requirements for Iron and Steel

    Comments: In the NPRM, FHWA proposed for an article, material, or 
supply to only be classified as an iron or steel product, a 
manufactured product, or other products as specified by law or in 2 CFR 
part 184. FHWA further proposed that an iron or steel product must meet 
FHWA's existing Buy America requirements for iron and steel in Sec.  
635.410(b). Finally, FHWA proposed that, except as otherwise provided 
in Sec.  635.410(c)(2)(i) and (ii), an article, material, or supply 
should not be considered to fall into multiple categories.
    Several commenters expressed confusion about what it meant for a 
material to meet the requirements of Sec.  635.410(b). Others expressed 
confusion over whether the rule would require that predominantly iron 
and steel components of manufactured products be compliant with Sec.  
635.410(b).
    Commenters representing the iron and steel industry expressed 
opposition to not requiring predominantly iron or steel components of 
manufactured products to be subject to FHWA's Buy America requirements 
for iron and steel. These commenters stated that this would be contrary 
to longstanding FHWA practice. They further stated their belief that 
not requiring predominantly iron or steel components of manufactured 
products to meet FHWA's Buy America requirements for steel and iron 
would be in conflict with BABA's savings provision, arguing that, 
pursuant to the savings provision in section 70917(a) and (b) of BABA, 
BABA cannot be used to modify an agency's existing requirements that 
meet or exceed BABA's. These commenters argued that BABA's savings 
provision does not merely allow FHWA to preserve its existing Buy 
America policies but explicitly preserves such policies. Commenters 
also argued that they believed changing Buy America policies is in 
conflict with BABA's intent to expand the application of Buy America 
requirements.
    Commenters further argued that legislative history demonstrates 
that Congress intended the 1982 STAA to cover all steel products, 
including steel components of manufactured products. Commenters also 
pointed to a statement in the Federal Register notice where FHWA 
instituted the Manufactured Products General Waiver which they believed 
indicated that FHWA acknowledged Congress' intent in expanding Buy 
America coverage to include all steel products. At the time, FHWA 
stated: ``Congressional concern that Federal money spent to improve 
highways should also aid U.S. industry is apparent in the first 
sentence of Section 165, which requires the Secretary of Transportation 
to ensure that funds authorized for Federal-aid highway projects would 
only buy U.S.-made steel. The FHWA therefore has expended the Buy 
America rule to include all steel products.'' See 48 FR 53102. Finally, 
commenters opposed to FHWA changing current policy argued that doing so 
would harm the domestic steel and iron industry and would allow foreign 
steel and iron to be used, which they stated was unfairly traded and 
higher-emitting.
    Other commenters, however, argued for removing the policy of 
applying FHWA's Buy America requirements to predominantly iron and 
steel to iron and steel components of manufactured products. These 
commenters stated that the current policy is creating a burden on 
contracting agencies, contractors, and manufacturers, as well as 
marketplace confusion as FHWA's policy does not apply to projects 
subject to BABA. One commenter stated that the history of iron and 
steel of components is not generally tracked, making compliance with 
the current policy difficult.
    FHWA Response: FHWA does not intend for its Buy America 
requirements on manufactured products to substantially modify its 
existing Buy America requirements for iron and steel, codified at Sec.  
635.410(b). For manufactured products containing sufficient amounts of 
iron and steel, by cost, to be classified as ``iron or steel products'' 
under the definition in Sec.  635.410(c)(1)(iii), FHWA believes that 
those products are properly subject to FHWA's existing Buy America 
requirements for iron and steel. Accordingly, FHWA is making clear in 
Sec.  635.410(c)(2) that such iron or steel products remain covered by 
FHWA's existing Buy America requirements for iron and steel in Sec.  
635.410(b). Under these requirements, pursuant to Sec.  
635.410(b)(1)(ii), all manufacturing processes of the iron or steel 
product, including application of a coating, must generally occur in 
the United States.\26\
---------------------------------------------------------------------------

    \26\ Under FHWA's Buy America requirements for iron or steel, a 
recipient of FHWA financial assistance can demonstrate compliance 
through other methods as well. For instance, Sec.  635.410(b)(2) 
allows a recipient to satisfy the requirements through having 
standard contract provisions mandating the use of domestic materials 
and products, including steel and iron materials, to the same or 
greater extent as the provisions of Sec.  635.410(b). Per Sec.  
635.410(b)(3), recipients may also demonstrate compliance with 
FHWA's Buy America requirements for iron and steel through including 
alternate bid provisions in conformance with that provision. 
Finally, FHWA notes, as stated above, that the de minimis provision 
for iron or steel products under Sec.  635.410(b)(4) continues to 
apply to iron or steel products.
---------------------------------------------------------------------------

    FHWA, however, is making clear what products are subject to its 
existing steel and iron requirements and what are subject to its new 
manufactured product requirements. Except for the specific products and 
components discussed below, FHWA believes that manufactured products 
containing predominantly iron or steel components should not be subject 
to both FHWA's existing steel and iron requirements and its new 
manufactured product

[[Page 2953]]

requirements. In other words, for Federal-aid projects, predominantly 
iron or steel components of a product classified as a manufactured 
product do not need to comply with FHWA's Buy America requirements for 
iron and steel; the manufactured product itself only needs to comply 
with FHWA's Buy America requirements for manufactured products. FHWA 
believes that, with the imposition of Buy America requirements for 
manufactured products, it is generally unnecessary to continue to apply 
Buy America requirements to predominantly iron and steel components of 
those manufactured products. Manufacturers may continue to use 
domestically manufactured iron and steel components for the purpose of 
meeting the 55 percent requirements, and FHWA expects manufacturers of 
products with more costly iron and steel components to continue to do 
so. FHWA is not, however, imposing a requirement that predominantly 
iron and steel components, no matter the value, must be domestically 
manufactured. FHWA believes, however, that for iron and steel 
components of lesser costs, it would be unduly burdensome to require 
tracking the origin and cost of these components as well as other 
components that are higher priced, which would be necessary to meet the 
55 percent requirements.\27\
---------------------------------------------------------------------------

    \27\ FHWA notes that recipients of FHWA financial assistance may 
need to track the cost of iron or steel components of a material to 
determine whether that material is properly classified as an iron or 
steel product or a manufactured product. In situations where the 
iron and steel content of a material is close to 50 percent of the 
total cost of all its components, this may require tracking the cost 
of components of lesser costs. If the material is properly 
classified as an iron or steel product, FHWA's Buy America 
requirements for iron and steel would require the iron and steel 
components, including the iron and steel components of lesser cost, 
to be domestically manufactured; however, larger, components that 
are not iron or steel would not need to be domestically produced. 
Alternatively, if the material is properly classified as a 
manufactured product, the origin of the iron and steel components of 
lesser cost would not need to be tracked. In either case, FHWA 
expects the burden of tracking the origin and cost of all components 
of lesser cost to be more burdensome than the requirements under 
this final rule.
---------------------------------------------------------------------------

    Further, requiring all predominantly iron and steel components to 
be domestically produced would create discrepancies between FHWA's Buy 
America requirements and BABA's requirements, which FHWA seeks to avoid 
when not justified. Under BABA, an article, material, or supply should 
not be considered to fall into multiple categories and must meet the 
specific Buy America preference for only the single category in which 
it is classified. See 2 CFR 184.4(e) and (f). Maintaining FHWA's 
current policy would result in some materials being BABA-compliant but 
not Buy America-compliant. As stated below in the discussion of Sec.  
635.410(c)(2)(i) and (ii), FHWA believes that there may be some 
products and components for which the continued application of this 
policy may be justified, and the departure from BABA's requirements, 
based on the circumstances surrounding the manufacture of the products 
and components. FHWA does not believe that the same rationale exists 
for all predominantly steel and iron components, no matter what size or 
what cost, in all manufactured products.
    FHWA does not believe that requiring manufactured products 
containing predominantly iron and steel components to generally be 
subject to only FHWA's Buy America requirements for manufactured 
products is contrary to BABA's savings provision in section 70917(a) 
and (b) of BABA. Section 70917(a) of BABA states that BABA ``shall 
apply to a Federal financial assistance program for infrastructure only 
to the extent that a domestic content procurement preference as 
described in section 70914 does not already apply to iron, steel, 
manufactured products, and construction materials.'' Section 70917(b) 
states that nothing in BABA ``affects a domestic content procurement 
preference for a Federal financial assistance program for 
infrastructure that is in effect and that meets the requirements of 
section 70914.'' FHWA interprets these provisions to mean that BABA 
only applies to FHWA's programs only to the extent that a domestic 
content procurement preference for iron, steel, manufactured products, 
and construction materials meeting or exceeding the requirements of 
section 70914 does not already exist. Further, FHWA interprets section 
70917(b) to mean that, where a domestic content procurement preference 
for iron, steel, manufactured products, and construction materials 
meeting or exceeding the requirements of section 70914 does exist, BABA 
has no effect on such domestic content procurement preferences.
    FHWA also disagrees that the legislative history of the 1982 STAA 
demonstrates that Congress intended the 1982 STAA to cover all steel 
components of manufactured products.
    Similarly, FHWA finds commenters' reference to FHWA's statement in 
the Federal Register notice that created the Manufactured Products 
General Waiver as failing to indicate congressional intent to apply Buy 
America requirements for steel to all steel components. In that 
statement, FHWA said that congressional intent in section 165 of the 
1982 STAA indicated that its Buy America requirements for steel should 
extend to all steel products. See 48 FR 53102. At the time, FHWA was 
referencing the fact that it had previously applied its Buy America 
requirements for steel to only structural steel when implementing 
section 401 of the 1978 STAA, and that it was then applying its Buy 
America requirements for steel to all steel products.
    Finally, FHWA believes that the effects of this rule on the 
domestic iron and steel industries will be minimal. Currently, 
predominantly iron and steel components of manufactured products used 
on Federal-aid projects are required to be produced domestically. FHWA 
believes it likely that, where such components represent a large cost 
of the manufactured product, manufacturers will continue to use such 
domestically produced components. Doing so will allow manufacturers to 
more easily satisfy the 55 percent requirement, while requiring minimal 
changes to product design. For less expensive iron and steel 
components, FHWA believes that manufacturers should have the option to 
replace them in their products with foreign components. FHWA agrees 
with commenters that tracing the origin of the iron and steel for these 
minor components is burdensome and, given their cost, does not provide 
sufficient value to the iron and steel industry to justify these 
burdens.

Section 635.410(c)(2)--Classification at the Work Site

    Comments: In the NPRM, FHWA proposed the classification of an 
article, material, or supply into a specific category to be based on 
its status at the time it is brought to the work site for incorporation 
into an infrastructure project; this classification would then 
determine which requirements, if any, the article, material, or supply 
would be subject to. In addition, FHWA proposed to state that the work 
site is generally the location of the infrastructure project at which 
the iron or steel product or manufactured product will be incorporated.
    Many commenters expressed confusion over how to distinguish between 
a component of a manufactured product and the manufactured product 
itself. Commenters were particularly concerned when components for a 
product were brought to the work site separately, with commenters 
expressing confusion over the fact that a material may be seemingly 
classified differently depending on whether its components

[[Page 2954]]

are assembled on or away from the work site. Some commenters wondered 
whether bringing components separately to a work site and assembling 
them there would result in the components constituting a kit for a 
manufactured product versus separate manufactured products. In 
contrast, other commenters stated that FHWA should not adopt a 
principle that components can be brought to a work site separately but 
still be considered a kit and classified as a single manufactured 
product; such commenters stated there is no authority in title 23, 
U.S.C. for FHWA to adopt such a principle. Commenters similarly argued 
that FHWA should not adopt a method for classification that would allow 
a system to be classified as a single manufactured product; however, 
other commenters pushed for the opposite. Finally, some commenters 
argued that FHWA should not base classification on the status of a 
product when it is brought to the work site at all but instead on the 
status of a product when it is procured.
    FHWA Response: FHWA believes that it is essential to set a point at 
which an article, material, or supply is classified into a specific 
category--whether that be an iron or steel product, a manufactured 
product, or any category specified in law such as a construction 
material--or not classified into any category. For manufactured 
products, this point is especially important to distinguish between the 
manufactured product itself and its components. FHWA believes that the 
point chosen by OMB, when the product is brought to the work site, 
appropriately allows for distinguishing among systems, which would be 
comprised of multiple manufactured products with Buy America 
requirements applied to each; manufactured products; and components. 
FHWA is concerned that alternative points of classification may lead to 
diluting the Buy America requirements. For instance, allowing for 
classification at the point a material is incorporated into a project 
may result in multiple manufactured products, iron or steel materials, 
and construction materials being combined together and classified as 
one single manufactured product. In particular, this kind of 
classification could result in iron and steel products generally being 
considered components of manufactured products, thereby functionally 
eliminating FHWA's longstanding requirement that all iron and steel 
products must be produced in the United States. FHWA further notes that 
were it to choose a different point, that could result in certain 
materials being classified differently under FHWA's Buy America 
requirements versus under 2 CFR part 184; this, in turn, may lead to 
multiple, different requirements applying to the same material. To 
ensure uniformity, FHWA believes it appropriate to classify materials 
at the same point as is done by Federal agencies subject to BABA.
    FHWA recognizes, however, that certain manufactured products may be 
acquired for incorporation into an infrastructure project from a single 
manufacturer or supplier as separate components, which are then 
assembled together to form a single product at the work site. FHWA 
refers to such products as ``kits.'' FHWA, in alignment with OMB, 
believes that these kits should be classified as a single manufactured 
product; the individual components of the kit should not, in other 
words, be classified as separate manufactured products when they are 
brought to the work site. \28\ FHWA believes that this approach avoids 
a situation where contractors are incentivized to assemble a kit 
offsite and then bring the finished product to the work site, even if 
it is inefficient to do so. FHWA further disagrees with commenters 
suggesting that this notion of kits is prohibited by title 23, U.S.C. 
Again, FHWA is not suggesting that multiple manufactured products can 
be brought to the work site, assembled into one system or finished 
project, and then only be subject to FHWA's Buy America requirements 
for manufactured products. FHWA is merely reflecting the notion, echoed 
by commenters, that while the point of classification is important to 
prevent the classification system from being abused to dilute the 
stringency of Buy America requirements, it should also not result in 
the same product being classified differently purely by the location 
where it is assembled.
---------------------------------------------------------------------------

    \28\ See 88 FR 57776 for OMB's discussion of kits.
---------------------------------------------------------------------------

    FHWA notes that the concept of kits has similarities with the idea 
of classifying a product based on its status at the time of 
procurement. FHWA emphasizes, however, that a kit represents a single 
product purchased from a single manufacturer or supplier. FHWA believes 
that classifying a product based on its status at the time of 
procurement may allow for the classification of entire systems as a 
single manufactured product, which would dilute the stringency of the 
Buy America requirements and not be in concert with classification 
under 2 CFR part 184.

Section 635.410(c)(2)(i), (ii)--Specified Products

    Comments: In the NPRM, as stated above, FHWA proposed to generally 
require that iron or steel materials only comply with FHWA's existing 
Buy America requirements for iron and steel found in Sec.  635.410(b) 
and that manufactured products only comply with FHWA's manufactured 
product requirements found in Sec.  635.410(c). In Sec.  
635.410(c)(2)(i), however, FHWA proposed to require precast concrete 
products that are classified as manufactured products to have all 
predominantly iron or steel components comply with FHWA's existing Buy 
America requirements for iron and steel. Similarly, in Sec.  
635.410(c)(2)(ii), FHWA proposed to require the cabins or other 
enclosures of ITS and other electronic hardware systems installed in 
the highway right of way or other real property and classified as 
manufactured products, if predominantly iron or steel, to comply with 
FHWA's existing Buy America requirements for iron and steel.
    Multiple commenters expressed opposition to the separate 
requirements placed on these specific manufactured products in Sec.  
635.410(c)(2)(i) and (ii). These commenters argued that such separate 
requirements prevented uniformity of FHWA's Buy America requirements to 
all manufactured products and uniformity with BABA's requirements for 
manufactured products. Commenters also argued that manufacturers do not 
know the ultimate owner of items when manufacturing and shipping them. 
Thus, commenters argued that these separate requirements created risks 
of non-compliance if a contractor purchases a product that is BABA-
compliant but not compliant with Sec.  635.410(c)(2)(i) or (ii), as the 
contractor may not know whether the product needs to be BABA-compliant 
versus FHWA-compliant when purchasing the product or may receive the 
wrong version of the product from the manufacturer. Another commenter 
argued that manufacturers would merely shift from using iron and steel 
to other materials where possible to avoid these requirements.
    Commenters representing the iron and steel industry argued that 
there is no distinction between iron and steel in the specific products 
referenced in Sec.  635.410(c)(2)(i) and (ii) and the iron and steel in 
the components of other manufactured products. These commenters argued 
that there is no reason to require the iron and steel in the specific 
products referenced in Sec.  635.410(c)(2)(i) and (ii) to be 
domestically produced but not the iron

[[Page 2955]]

and steel in other products. Finally, commenters sought clarification 
over the definition of ``intelligent transportation systems and other 
electronic hardware systems'' found in Sec.  635.410(c)(2)(ii).
    FHWA Response: FHWA generally believes that a single material, if 
classified as an iron or steel product, should only be subject to its 
Buy America requirements for iron and steel in Sec.  635.410(b); if 
classified as a manufactured product, FHWA generally believes the 
product should only be subject to its Buy America requirements for 
manufactured products in Sec.  635.410(c). FHWA also believes, however, 
that iron or steel components of precast concrete and iron or steel 
enclosures of ITS and other electronic hardware systems installed in 
the highway right of way or other real represent unique situations 
justifying FHWA to generally apply its Buy America requirements for 
manufactured products to the products as a whole and its Buy America 
requirements for iron and steel to specific components.
    As stated in the NPRM, FHWA believes that the products referenced 
in Sec.  635.410(c)(2)(i) and (ii) are regularly used in highway 
construction projects and that manufacturers have formed longstanding 
supply chains to incorporate Buy America-compliant iron or steel 
components into them. FHWA believes that these products are currently 
used extensively in Federal-aid projects, where, currently, all their 
predominantly iron and steel components are required to comply with 
FHWA's Buy America requirements for iron and steel. FHWA further 
believes that the iron and steel in the precast concrete and the iron 
and steel in the enclosures of ITS and other electronic hardware 
systems represent a significant portion of the value of those 
manufactured products.\29\ FHWA thus believes that the requirements of 
Sec.  635.410(c)(2)(i) and (ii) will have a limited impact on the 
manufacture of these specifically-referenced products. While FHWA 
acknowledges that the requirements that apply to these products are 
distinct from those that apply to other manufactured products under 
FHWA's Buy America regulation and BABA, FHWA believes this is justified 
by the significant market for these products solely within FHWA's 
funding programs. FHWA therefore believes that manufacturers of these 
products will be incentivized to produce products compliant with these 
unique requirements in sufficient amounts and that contractors should 
be able to determine whether any particular product is compliant with 
FHWA's regulations.
---------------------------------------------------------------------------

    \29\ For example, as indicated in the responses to an RFI 
published collectively by DOT and the U.S. Department of Energy, the 
housing of an EV charger may comprise over 50 percent of the costs 
of the charger. 86 FR 67115 (Nov. 24, 2021).
---------------------------------------------------------------------------

    FHWA emphasizes that the specific requirements of Sec.  
635.410(c)(2)(i) and (ii) apply only to the specifically referenced 
products and components. While FHWA understands that the iron and steel 
in these products is similar to the iron and steel in all manufactured 
products, FHWA believes that the specific nature of these products, as 
stated above, justifies different requirements from other manufactured 
products.
    With respect to ``intelligent transportation systems and other 
electronic hardware systems,'' FHWA clarifies that its requirements in 
Sec.  635.410(c)(2)(ii) apply to the cabinets or other enclosures of 
the physical electronic hardware system, or other physical ITS, if (1) 
the system is classified as a manufactured product under Sec.  
635.410(c)(1)(iv); (2) the system is installed in the highway right of 
way or other real property; and (3) the cabinets or other enclosures of 
such system consists wholly or predominantly of iron or steel or a 
combination of both. Where the requirements of Sec.  635.410(c)(2)(ii) 
do apply, the cabinet or other enclosure must comply with FHWA's 
existing Buy America requirements for iron and steel, meaning that all 
iron and steel of the cabinet or other enclosure must be domestically 
produced.
    Finally, for the components specified in Sec.  635.410(c)(2)(ii), 
FHWA is modifying a reference from components that are ``manufactured 
predominantly or iron or steel or a combination of both'' to components 
that ``consist wholly or predominantly of iron or steel or a 
combination of both.'' FHWA does not intend this to be a substantive 
change but instead to mirror the language used in the definition of 
``iron or steel products.'' Through this change, FHWA seeks to make 
clear that the determination of whether components of precast concrete 
products or the cabinets or other enclosures of intelligent 
transportation systems and other electronic hardware systems that are 
installed in the highway right of way or other real property should be 
determined as iron or steel products and subject to FHWA's Buy America 
requirements for iron and steel should be based on the same definition 
that iron or steel products are subject to generally.

Section 635.410(c)(3)--Cost of Components

    Comments: In Sec.  635.410(c)(3), FHWA proposed to determine 
whether the cost of components for manufactured products is greater 
than 55 percent of the total cost of all components through the same 
method as used under 2 CFR 184.5 for projects subject to BABA. Per 2 
CFR 184.5(a), the cost of a component purchased by the manufacturer is 
the acquisition cost, including transportation costs to the place of 
incorporation into the manufactured product (whether or not such costs 
are paid to a domestic firm), and any applicable duty (whether or not a 
duty-free entry certificate is issued). For components manufactured by 
the manufacturer, 2 CFR 184.5(b) the cost of a component is all costs 
associated with the manufacture of the component, including 
transportation costs as described in 2 CFR 184.5(a), plus allocable 
overhead costs, but excluding profit; the cost of such components also 
does not include any costs associated with the manufacture of the 
manufactured product. FHWA copied this definition verbatim into 
proposed Sec.  635.410(c)(3).
    Some commenters disagreed with FHWA's approach to determining the 
cost of components entirely, requesting that FHWA should allow 
additional costs to factor into the cost of any component, including 
the cost of domestic manufacturing, the cost of software and firmware, 
the value added at each manufacturing stage, the cost of the 
intellectual property, and the cost of the research and development for 
the product. One commenter argued that the cost of components should be 
determined at the overall system level.
    Other commenters sought clarification on FHWA's proposed 
definition. Commenters expressed confusion over what were allowable 
manufacturing costs for the component versus unallowable manufacturing 
costs for the manufactured product. Others sought clarification over 
what FHWA meant by allocable overhead costs.
    FHWA Response: FHWA disagrees with commenters suggesting that FHWA 
depart from the standard used in 2 CFR 184.5 to determine the cost of 
components. FHWA believes that uniformity with BABA's requirements is 
important and beneficial where appropriate to ensure that manufactured 
products are compliant under FHWA's Buy America statute and BABA and to 
allow for contracting agencies, contractors, and manufacturers to build 
up a greater amount of experience with these requirements.

[[Page 2956]]

    FHWA notes that Sec.  635.410(c)(3)(ii) differentiates between 
costs associated with the manufacture of a component, which are to be 
considered in determining the cost of the component, and costs 
associated with the manufacture of the manufactured product, which are 
not. Costs associated with the manufacture of the manufactured product 
itself, outside of the cost to manufacture a component, should not be 
considered in valuing the component. For example, the cost of 
assembling the component into the manufactured product is a cost of 
manufacturing the manufactured product, not a cost of manufacturing the 
component.
    Finally, FHWA is correcting an error in the proposed regulatory 
text, where Sec.  635.410(c)(3)(ii) made reference to ``paragraph (a) 
of this section.'' That reference is from 2 CFR 184.5(b) and refers to 
2 CFR 184.5(a). FHWA is thereby correcting the reference to Sec.  
635.410(c)(3)(i) to properly align with 2 CFR part 184.

VI. Rulemaking Analyses and Notices

A. Executive Order 12866 (Regulatory Planning and Review), Executive 
Order 13563 (Improving Regulation and Regulatory Review), and DOT 
Regulatory Policies and Procedures

    The OMB has determined that this rulemaking is a significant 
regulatory action within the meaning of E.O. 12866, as amended by E.O. 
14094.
    A more detailed discussion of the economic analysis associated with 
this rulemaking can be found in the RIA, which is available on the 
docket. The RIA estimates the costs and benefits associated with 
imposing Buy America requirements to manufactured products. The 
expected benefits of this rule relate to protecting and expanding 
domestic manufacturing, increasing the resiliency of supply chains, and 
increasing consistency in applying domestic content procurement 
preferences for manufactured products between FHWA and other Federal 
agencies that are subject to BABA's requirements. None of these 
benefits have been quantified.
    The costs of this rule relate to increased material costs for 
manufactured products used in highway construction projects, 
administrative costs to FHWA and recipients of FHWA financial 
assistance, and potential delays in project delivery. FHWA estimates 
that total costs associated with this rule, between FY 2026 and FY 
2035, will range from $545 million to $8,466 million at a 2 percent 
discount rate. The estimated increase in material costs for 
manufactured products ranges from $41 million to $980 million per year. 
Much of the wide range of uncertainty surrounding the estimates stems 
from the difficulty of estimating (1) the fraction of inputs to highway 
construction that are manufactured products; (2) the fraction of 
manufactured products that are currently domestically supplied but fail 
to meet the 55 percent requirement; and (3) the likely price premiums 
for purchasing manufactured products that would be compliant with this 
rule, compared to non-compliant manufactured products currently used in 
highway construction. FHWA further estimates an additional $167,000 per 
year in increased FHWA administrative costs to cover the salary and 
employer-provided benefits of an additional Federal employee to help 
administer the Buy America program. We also estimate an additional $22 
million per year in administrative costs to recipients of FHWA 
financial assistance related to verifying product compliance. Those 
costs do not include additional administrative costs related to setting 
up systems to track compliance or applying for any project-specific 
waivers that may be necessary based on specific circumstances.
    The 10-year discounted totals of these costs are provided in the 
table below at a 2 percent discount rate. The rest of the costs could 
not be quantified with the information available.

------------------------------------------------------------------------
                 Category                       10-Year total at 2%
------------------------------------------------------------------------
Benefits:                                  .............................
  Promote Domestic Manufacturing.........  Not quantified.
  Supply Chain Resiliency................  Not quantified.
  Consistency............................  Not quantified.
Total Benefits...........................  Not quantified.
Costs:                                     .............................
  Materials Costs........................  $361 to $8,282.
  FHWA and State Administrative Costs....  $184.
  Other Administrative Costs.............  Not quantified.
  Project Delay..........................  Not quantified.
  Negative Secondary Impacts.............  Not quantified.
Total Costs..............................  $545 to $8,466.
Annualized Costs.........................  $61 to $942.
------------------------------------------------------------------------

    Annualized costs are $61 million to $942 million per year at a 2 
percent discount rate, $60 million to $932 million per year at a 3 
percent discount rate, and $58 million to $890 million per year at a 7 
percent discount rate.
    FHWA has responded to comments made regarding the preliminary 
regulatory impact analysis in the RIA. This rule will not adversely 
affect in a material way the economy, any sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, territorial, or Tribal governments or 
communities. These changes do not create a serious inconsistency with 
any other agency's action or materially alter the budgetary impact of 
any entitlements, grants, user fees, or loan programs.

B. Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (Pub. L. 96-354, 
5 U.S.C. 601-612), FHWA has evaluated the effects of this rule on small 
entities and has determined that it is not anticipated to have a 
significant economic impact on a substantial number of small entities. 
This rule would impose Buy America requirements for manufactured 
products on recipients of FHWA financial assistance, including States, 
local governments, and other grant recipients. These recipients are 
primarily States, who receive apportioned funding from FHWA, and who 
are not included in the definition of small entity set forth in 5 
U.S.C. 601.
    FHWA believes the projected impact on small entities that utilize 
FHWA funding would be negligible. This final rule will require such 
small entities to purchase manufactured products that are manufactured 
in the United States and have the cost of components that are mined, 
produced, or manufactured in the United States be greater than 55 
percent of the total cost of all components of the manufactured product 
under contracts subject to FHWA's Buy America requirements. FHWA 
acknowledges that some Buy America-compliant manufactured products may 
be more expensive than manufactured products that are non-compliant. 
Thus, this final rule may result in increased project costs. To the 
extent this rule requires expenditures by State, local governments, and 
other grant recipients on Federal-aid projects, they are reimbursable. 
In addition, to the extent that small governmental jurisdictions expend 
additional funds to purchase Buy America-compliant manufactured 
products, based on FHWA's regulatory impact analysis, FHWA does not 
believe that any additional expenditure would be economically 
significant.
    FHWA recognizes that small businesses, as defined by 5 U.S.C. 
601(3), who are also considered small entities, may be affected 
indirectly by this final rule when they seek to provide manufactured 
products to recipients of FHWA financial assistance who are subject to 
the new Buy America requirements. For small businesses not currently 
compliant with FHWA's Buy America requirements for manufactured 
products who wish to provide Buy America-compliant products, they may 
need to change manufacturing processes or component suppliers. Small 
entities

[[Page 2957]]

that may be impacted indirectly by a rulemaking, however, are not 
subject to analysis under the Regulatory Flexibility Act. See Mid-Tex 
Electric Cooperative, Inc. v. Federal Energy Regulatory Commission, 773 
F.2d 327 (D.C. Cir. 1985).
    Therefore, FHWA certifies that the action would not have a 
significant economic impact on a substantial number of small entities.

C. Unfunded Mandates Reform Act of 1995

    This rule does not impose unfunded mandates as defined by the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48). 
Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
Federal agencies to prepare a written statement, which includes 
estimates of anticipated impacts, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $177 million, using the most current (2022) Implicit 
Price Deflator for the Gross Domestic Product. The definition of 
``Federal mandate'' in the Unfunded Mandates Reform Act excludes 
financial assistance of the type in which State, local, or Tribal 
governments have authority to adjust their participation in the program 
in accordance with changes made in the program by the Federal 
Government. The Federal-aid highway program permits this type of 
flexibility.

D. Executive Order 13132 (Federalism Assessment)

    The E.O. 13132 requires agencies to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that may have a substantial, direct effect on the States, on 
the relationship between the National Government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government. FHWA has analyzed this rule in accordance with the 
principles and criteria contained in E.O. 13132. FHWA has determined 
that this rule would not have sufficient federalism implications to 
warrant the preparation of a federalism assessment. FHWA has also 
determined that this rule would not preempt any State law or State 
regulation or affect the States' ability to discharge traditional State 
governmental functions.

E. Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et 
seq.), Federal Agencies must obtain approval from OMB for each 
collection of information they conduct, sponsor, or require through 
regulations. FHWA has determined that this rule does not contain 
collection of information requirements for the purposes of the PRA.

F. National Environmental Policy Act

    FHWA has analyzed this rule pursuant to the NEPA and has determined 
that it is categorically excluded under 23 CFR 771.117(c)(2), which 
applies to the promulgation of rules, regulations, and directives. 
Categorically excluded actions meet the criteria for categorical 
exclusions under the Council on Environmental Quality regulations and 
under 23 CFR 771.117(a) and normally do not require any further NEPA 
approvals by FHWA. This rule will establish Buy America requirements 
for manufactured products. FHWA does not anticipate any adverse 
environmental impacts from this final rule, and no unusual 
circumstances are present under 23 CFR 771.117(b).

G. Executive Order 13175 (Tribal Consultation)

    FHWA has analyzed this rule in accordance with the principles and 
criteria contained in E.O. 13175, ``Consultation and Coordination with 
Indian Tribal Governments.'' FHWA does not believe that the final rule 
would have substantial direct effects on one or more Indian Tribes, 
would not impose substantial direct compliance costs on Indian Tribal 
governments, and would not preempt Tribal laws. Therefore, a Tribal 
summary impact statement is not required.

H. Executive Order 12898 (Environmental Justice)

    The E.O. 12898 requires that each Federal Agency make achieving 
environmental justice part of its mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of its programs, policies, and 
activities on minorities and low-income populations. FHWA has 
determined that this rule does not raise any environmental justice 
issues.

I. Regulation Identifier Number

    A RIN is assigned to each regulatory action listed in the Unified 
Agenda of Federal Regulations. The Regulatory Information Service 
Center publishes the Unified Agenda in the spring and fall of each 
year. The RIN contained in the heading of this document can be used to 
cross reference this action with the Unified Agenda.

List of Subjects in 23 CFR Part 635

    Grant programs--transportation, Highways and roads, Reporting and 
recordkeeping requirements.

    Issued under authority delegated in 49 CFR 1.85.
Gloria M. Shepherd,
Executive Director, Federal Highway Administration.

    For the reasons stated in the preamble, FHWA amends title 23, Code 
of Federal Regulations, part 635, as set forth below:

PART 635--CONSTRUCTION AND MAINTENANCE

0
1. The authority citation for part 635 continues to read as follows:

    Authority:  Sections 1525 and 1303 of Public Law 112-141, Sec. 
1503 of Public Law 109-59, 119 Stat. 1144; 23 U.S.C. 101 (note), 
109, 112, 113, 114, 116, 119, 128, and 315; 31 U.S.C. 6505; 42 
U.S.C. 3334, 4601 et seq.; Sec. 1041(a), Public Law 102-240, 105 
Stat. 1914; 23 CFR 1.32; 49 CFR 1.85(a)(1).

Subpart D--General Material Requirements

0
2. Amend Sec.  635.410 by:
0
a. Removing the words ``steel or iron materials'' and adding, in their 
place, the words ``iron or steel products'' in paragraph (b)(1);
0
b. Removing the word ``State'' and adding in its place the word 
``recipient'' in paragraphs (b)(2) and (3);
0
c. Removing the words ``steel and iron materials'' and adding, in their 
place, the words ``iron or steel products'' in paragraphs (b)(2), (3), 
and (4);
0
d. Revising paragraph (c); and
0
e. Removing the word ``State'' and adding in its place the word 
``recipient'' in paragraph (d).
    The revision reads as follows:

Sec.  635.410   Buy America requirements.

* * * * *
    (c) No Federal-aid highway construction project is to be authorized 
for advertisement or otherwise authorized to proceed unless the 
manufactured products used and permanently incorporated in such project 
are produced in the United States. To meet the requirement in this 
paragraph (c), the manufactured product must meet the following:
    (1) The following definitions apply to this section:
    (i) Component means an article, material, or supply, whether

[[Page 2958]]

manufactured or unmanufactured, incorporated directly into a 
manufactured product or, where applicable, an iron or steel product.
    (ii) Excluded materials means section 70917(c) materials as defined 
in 2 CFR 184.3.
    (iii) Iron or steel products means articles, materials, or supplies 
that consist wholly or predominantly of iron or steel or a combination 
of both.
    (iv) Manufactured products means articles, materials, or supplies 
that have been processed into a specific form and shape, or combined 
with other articles, materials, or supplies to create a product with 
different properties than the individual articles, materials, or 
supplies. If an item is classified as an iron or steel product, an 
excluded material, or other product category as specified by law or in 
2 CFR part 184, then it is not a manufactured product. However, an 
article, material, or supply classified as a manufactured product may 
include components that are iron or steel products, excluded materials, 
or other product categories as specified by law or in 2 CFR part 184. 
Mixtures of excluded materials delivered to a work site without final 
form for incorporation into a project are not a manufactured product.
    (v) Manufacturer, in the case of manufactured products, means the 
entity that performs the final manufacturing process that produces a 
manufactured product.
    (vi) Predominantly of iron or steel or a combination of both means 
that the cost of the iron and steel content exceeds 50 percent of the 
total cost of all its components. The cost of iron and steel is the 
cost of the iron or steel mill products (such as bar, billet, slab, 
wire, plate, or sheet), castings, or forgings utilized in the 
manufacture of the product and a good faith estimate of the cost of 
iron or steel components.
    (vii) Produced in the United States, in the case of manufactured 
products, means:
    (A) For projects obligated on or after October 1, 2025, the product 
was manufactured in the United States; and
    (B) For projects obligated on or after October 1, 2026, the product 
was manufactured in the United States and the cost of the components of 
the manufactured product that are mined, produced, or manufactured in 
the United States is greater than 55 percent of the total cost of all 
components of the manufactured product.
    (2) An article, material, or supply shall only be classified as an 
iron or steel product, a manufactured product, or other products as 
specified by law or in 2 CFR part 184. An iron or steel product must 
meet the requirements of paragraph (b) of this section. Except as 
otherwise provided in this paragraph (c), an article, material, or 
supply shall not be considered to fall into multiple categories. In 
some cases, an article, material, or supply may not fall under any of 
the above-listed categories. The classification of an article, 
material, or supply as falling into one of the categories listed in 
this paragraph (c) must be made based on its status at the time it is 
brought to the work site for incorporation into an infrastructure 
project. In general, the work site is the location of the 
infrastructure project at which the iron or steel product or 
manufactured product will be incorporated.
    (i) With respect to precast concrete products that are classified 
as manufactured products, components of precast concrete products that 
consist wholly or predominantly of iron or steel or a combination of 
both shall meet the requirements of paragraph (b) of this section. The 
cost of such components shall be included in the applicable calculation 
for purposes of determining whether the precast concrete product is 
produced in the United States.
    (ii) With respect to intelligent transportation systems and other 
electronic hardware systems that are installed in the highway right of 
way or other real property and classified as manufactured products, the 
cabinets or other enclosures of such systems that consist wholly or 
predominantly of iron or steel or a combination of both shall meet the 
requirements of paragraph (b) of this section. The cost of cabinets or 
other enclosures shall be included in the applicable calculation for 
purposes of determining whether systems referred to in the preceding 
sentence are produced in the United States.
    (3) In determining whether the cost of components for manufactured 
products is greater than 55 percent of the total cost of all 
components, recipients shall determine the cost as follows:
    (i) For components purchased by the manufacturer, the acquisition 
cost, including transportation costs to the place of incorporation into 
the manufactured product (whether or not such costs are paid to a 
domestic firm), and any applicable duty (whether or not a duty-free 
entry certificate is issued); or
    (ii) For components manufactured by the manufacturer, all costs 
associated with the manufacture of the component, including 
transportation costs as described in paragraph (c)(3)(i) of this 
section, plus allocable overhead costs, but excluding profit. Cost of 
components does not include any costs associated with the manufacture 
of the manufactured product.
    (4) The provisions of this paragraph (c) are separate and severable 
from one another and from the other provisions of this section. If any 
provision is stayed or determined to be invalid, the remaining 
provisions shall continue in effect.
* * * * *
[FR Doc. 2024-31350 Filed 1-13-25; 8:45 am]
BILLING CODE 4910-22-P
```