Source: https://www.everycrsreport.com/changes/20151110_R44266_cd146758dd38c5e50231c44ed1b6303189475494__20170614_R44266_b814d49562c9b4317c877a08c7592da5dd69558b.html
Timestamp: 2019-04-22 16:03:15+00:00

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With the aim of protecting American manufacturing and manufacturing jobs, Congress over the years has passed several domestic content laws. Statements and actions by the Trump Administration about reinvigorating domestic manufacturing and reinvesting in infrastructure have stimulated renewed interest in these laws, including Buy America. The President's "Buy American and Hire American" initiative includes an executive memorandum requiring the Secretary of Commerce to develop a plan for new pipelines in the United States to be made from domestically produced iron and steel, and a separate executive order directing agencies to strictly adhere to Buy America laws. Buy America refers to several similar statutes and regulations that apply to federal funds used to support projects involving highways, public transportation, aviation, and intercity passenger rail, including Amtrak. Unless a nationwide or project-specific waiver is granted, Buy America requires the use of U.S.-made iron and steel and the domestic production and assembly of other manufactured goods. One of the main manufacturing industries this applies to is the production of rolling stock (rail cars and buses) used in federally funded public transportation and Amtrak's intercity passenger rail service. This report examines the effects of Buy America on these two industries, iron and steel manufacturing and rolling stock manufacturing, in the context of industry trends.
Buy America dates to passage of the Surface Transportation Assistance Act of 1978 (STAA; P.L. 95-599), and is different from the Buy American Act, enacted in 1933, which applies to direct purchases by the federal government. Although the Buy America provisions have been in place in some form for almost 40 years, it is difficult to know how they have affected steel and rolling stock manufacturing in the United States, whether measured by jobs, output, or any other indicator. Empirical evidence on the economic benefits or costs of domestic preferencecontent laws is largely lacking, in part because the effects are small compared with macroeconomic forces such as global economic growth and the related growth in demand for steel. Although employment in domestic steel manufacturing has declined sharply, this is largely attributable to higher industry productivity. Buy America has likely promoted the production of rail cars and buses in the United States, but these industries are relatively small, and demand is related strongly to the combined level of federal, state, and local government funding.
Buy America could increase the cost of some transportation projects by requiring the purchase of domestic steel, vehicles, and vehicle components when imported products might be cheaper. In some cases, the difficulty of complying with Buy America rules has been blamed for project delays. The cost of imports used in federally supported projects could rise if somebecause agencies within the U.S. Department of Transportation (DOT) begin to require that theserequire some imports be carried on U.S.-flag vessels in compliance with the FY2009 Defense Act (Duncan Hunter National Defense Authorization Act (NDAA; P.L. 110-417, §3511). Requiring transport by U.S.-flag vessels may also contribute to project delays. Lack of information makes claims about project cost and delay difficult to assess.
Much of the congressional activity related to Buy America seeks to strengthen its requirements. The Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act (H.R. 22), a six-year surface transportation bill passed by the Senate in July 2015, would increase from 60% to 70% the share of U.S.-made components and subcomponents required in public transportation vehicles bought with federal support. A version of H.R. 22 passed by the House in November 2015, the Surface Transportation Reauthorization and Reform Act of 2015, would do the same.
There are no legislative proposals in the 114th Congress to loosen Buy America requirements substantially. Two proposed provisions in the DRIVE Act would make Buy America somewhat less restrictive. The DRIVE Act would raise the threshold for purchases in public transportation subject to Buy America requirements from $100,000 to $150,000. It would also subject Amtrak to Buy America requirements only for purchases of $5 million or more, as opposed to the current threshold of $1 million.
In 1978, Congress passed legislation to place domestic content restrictions on federally funded transportation projects that are carried out by nonfederal government agencies such as state and local governments.2 These restrictions are commonly referred to as the Buy America Act, or more simply, Buy America. Fixing America's Surface Transportation (FAST) Act (P.L. 114-94), enacted in December 2015, increased the share of public transit rolling stock components and subcomponents that must be produced in the United States from 60% in FY2017 to 65% in FY2018 and FY2019, and to 70% for FY2020 onward. Other bills have proposed increasing the share to 100%. Other legislative proposals have called for expanding Buy America to other parts of the transportation system, such as pipelines, and to other sectors, including clean energy manufacturing.
To evaluate the implications of Buy America on domestic manufacturing, this report analyzes the effects of Buy America on steel and rolling stock manufacturing in the context of industry trends. It also briefly discusses the effects of Buy America on the transportation system. The report begins by explaining Buy America restrictions in more detail; how Buy America comports with international trade agreements that generally forbid procurement restrictions favoring domestic products; and how a relatively new Buy America-like provision provision enacted by Congress may require imports of materials on federally funded transportation projects to be carried on U.S.-flag ships. The report identifies policy options Congress might consider in light of recent legislative proposals, such as the American Pipeline Jobs and Safety Act of 2015 (H.R. 3385), which involves broadening the applicability of Buy America requirements to federally regulated pipelines that receive no federal funding.
Even though FHWA waives Buy America requirements for manufactured products, except those made predominantly of iron and steel, this is not the case with other DOTU.S. Department of Transportation (DOT) agencies and Amtrak. For example, for the purchase of rolling stock using FTA funds, the Buy America requirement is waived only if (1) the cost of the components produced in the United States in FY2017 is more than 60% of the cost of all components of the rolling stock (65% for FY2018 and FY2019, and 70% for FY2020 onward); and (2) final assembly of the rolling stock occurs in the United States (49 U.S.C. §5323(j) and 49 C.F.R. §661). Moreover, for a rolling stock component to be considered produced in the United States or of domestic origin, "more than 60% of the subcomponents of that component, by cost, must be of domestic origin, and the manufacture of the component must take place in the United States" (49 C.F.R. §661.11(g)).11 For other manufactured goods regulated by FTA and not eligible for the rolling stock waiver, 12 For nonrolling stock manufactured goods purchased using FTA funds, 100% of the components, including steel and iron, must be made in the United States and assembly must be done in the United States, and 100% of the components, including steel and iron, must be made in the United States.
. According to 49 C.F.R. §661.5, "a component is considered of U.S. origin if it is manufactured in the United States, regardless of the origin of its subcomponents."
The U.S. government builds few transportation projects directly. Instead, it generally funds highways, airports, and public transportation projects by making grants or loans to state or local governments. This funding structure has made it possible to avoid claims that Buy America violates international trade agreements.
The United States is a signatory to international agreements that restrict discrimination against trading partners in government procurement. Currently, 4347 World Trade Organization (WTO) members, including the United States, have made binding commitments under the WTO Agreement on Government Procurement (GPA), whereby each provides access to the others'the others access to its national procurement markets.1415 Most U.S. bilateral and regional free trade agreements also include public procurement provisions. These agreements are generally based on "national treatment," which requires" and require the United States to treat foreign goods, services, and suppliers of other signatories no less favorably than U.S. goods, services, and suppliers. As a consequence, firms based in countries covered by such agreements can bid on covered U.S. government procurement contracts over a certain dollar threshold. The thresholds are adjusted every two years.1516 National treatment also means U.S. firms can bid on contracts in foreign procurement markets, giving American suppliers treatment no less favorable than domestic suppliers.
As part of.23 Changes to Buy America in MAP-21 and FAST Act There have been several changes to Buy America in the two most recent surface transportation reauthorization acts, the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), enacted in July 2012, and the Fixing America's Surface Transportation (FAST) Act (P.L. 114-94), enacted in December 2015. As part of MAP-21, Congress sought to prevent sponsors of highway projects141), which reauthorized federal highway and transit programs in 2012, Congress made a change to Buy America as it applies to highway funding. The change aims to prevent project sponsors from segmenting a project into smaller parts, some federally funded and some not, so as to free some segments of the project from Buy America requirements. To accomplish this, MAP-21 specified that FHWA Buy America requirements apply to all contracts eligible for assistance within the scope of a project's National Environmental Policy Act of 1969 (NEPA) document if at least one contract for the project is federally fundedfunded.
Another effect of the provision prohibiting the segmenting of projects is that utility relocation work done as part of a federally funded highway project must now be Buy America-compliant even if the contract to do the utility work does not use federal funds.2425 This change hasinitially caused concern among state departments of transportation and industry associations that projects would be delayed as utilities sought to obtain Buy America-compliant products. In response, FHWA delayed implementation of the new requirements until January 1, 2014. The effects of compliance since then on highway projects, utilities, and manufacturers of products used by the utility industry are unknown.
MAP-21 also made changes aimed at making the FTA waiver determination process more transparent. MAP-21 requires FTA to publish each waiver request and a detailed explanation of the waiver determination in the Federal Register, and to make them easily accessible on its website. In addition, MAP-21 requires that FTA provide a report on waivers granted in the previous year to the Senate Banking Committee and the House Transportation and Infrastructure Committee.
The Trump Administration has announced that it will pursue efforts to protect domestic industries as part of its "Buy American and Hire American" initiative. To date, this includes two actions with respect to Buy America. First, an executive memorandum requires the Secretary of Commerce to develop a plan to have all new pipelines in the United States "use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law."27 According to the memorandum, steel made in the United States from imported scrap or imported slabs is not to be considered produced in the United States. Second, a separate executive order directs that "every agency shall scrupulously monitor, enforce, and comply with Buy American Laws, to the extent they apply, and minimize the use of waivers, consistent with applicable law."28 The term "Buy American Laws" is defined in the executive order to include Buy America.
Unless the requirements are waived by the federal agency concerned, Buy America provisions require the use of U.S.-made steel in a wide variety of applications.
Figure 1 provides a graphic depiction of the iron and steel manufacturing process. Originally, Buy America covered raw materials used in steel manufacturing. A lack of adequate domestic supply resulted in a 1995 nationwide waiver for raw materials (iron ore and limestone), scrap (recycled steel scrap), pig iron, and processed, pelletized, and reduced iron ore.2731 Because of the waiver, U.S. steel mills may use imported inputs to make Buy America-compliant steel products. Therefore, the part of steel production shown in the shaded section of Figure 1 is currently not subject to Buy America requirements.
It is not clear how these requirements might be altered through the regulatory process, if at all, in response to President Trump's "Buy American and Hire American" executive order.
Source: Figure adapted by CRS from Eurofer, Study on the Competitiveness of the European Steel Sector, August 2008, p. 10.
Assessing the economic effects of Buy America on the steel industry is difficult due to the lack of relevant data.3136 It is unclear how much iron and steel are used in transportation projects that have federal funding; hence data are not available to calculate how much steel is produced and sold domestically as a direct result of Buy America. Nevertheless, the available data suggest that the steel produced for the Buy America market represents a small portion of total domestic demand for steel.
Source: CRS analysis of Bureau of Labor Statistics, Current Employment Statistics, for iron and steel mills (NAICS 3311) and steel products from purchased steel (NAICS 3312).
Besides its restriction on the sourcing of iron and steel, Buy America also places limits on state and local governments and Amtrak when using federal funds to purchase manufactured goods. One of the main manufactured products this affects is rolling stock, which includes intercity passenger rail trains, public transportation rail cars and buses, and associated equipment.3742 Under Buy America domestic sourcing requirements, as noted earlier, rolling stock final assembly must take place in the United States. Moreover, significant proportions of the systems and components used to assemble rail vehicles and buses must be manufactured in the United States, although this can differ depending on the agency source of the federal funds.
According to one industry estimate, the U.S. domestic market for railroad rolling stock manufacturing totaled $1419 billion in 2014.382016.43 Federal data indicate that manufacturers of all types of railroad rolling stock directly employed 27,30030,100 workers in 2014, making up2015, accounting for 0.2% of total factory employment. These data, however, includecover the production of equipment that is not publicly funded and thus not subject to Buy America, such as freight locomotives and freight rail cars.3944 According to one industry estimate, the size of the U.S. market for new street, subway, and transit cars, which would represent only a portion of the Buy America public transportation market, was at least $2.6 billion in 2014.40 Demand for intercity passenger rail and rebuilt transit cars rolling stock would be in addition to the $2.6 billion. Imports of all railroad rolling stock, including freight cars and railway track maintenance equipment, and street, subway, and transit cars, accounted for less than 10% of total domestic rail equipment sales in 2014, according to various industry estimates.41 Publicly available data do not allow the calculation of the share of imports in the Buy America market.
Some argue that more public-sector investment in public transportation systems is needed to significantly bolster the passenger rail car manufacturing industry in the United States.4651 Over the last decade, annual domestic demand for new passenger rail cars has fluctuated from a low of 497 units in 2011 to a high of 1,141 in 2009 (see Table 1).4752 Since 20052006, domestic manufacturers have shipped about 8,2008,970 new passenger cars to Amtrak and transit agency purchasers. This figure includes regional, intercity, rapid transit, and light rail cars as well as streetcar units. There were reports of a backlog of more than 6,0003,700 vehicles at the end of 20142016, including 11059 intercity cars for Amtrak to be manufactured by CAF USA and 775 rapid transit, 765 commuter cars to be manufactured by Bombardier for the Bay Area Rapid Transit (BART) system in California, and 590 rapid transit cars to be built by Kawasaki for the Washington Metropolitan Area Transit Authority (WMATA).53system in California.48 It is unclear how much of this manufacturing would occur in the United States in the absence of Buy America.
Source: Douglas John Bowen, 2015 Passenger Rail Outlook, "Equipment Suppliers Keep Sharp as More Customers Keep Coming,"2016 Passenger Rail Car Market, Railway Age, pp. 49-5346-47, January 20152017.
Buy America is primarily an industrial policy designed to protect U.S. manufacturing and manufacturing employment. However, Buy America could increase the cost and completion time of at least some transportation projects, and may result in fewer projects being undertaken. Evidence of these effects, however, is largely anecdotal. In a a review of the costs and benefits of various federal requirements on highway projects, the Government Accountability Office (GAO) found that several studies discussed regulatory costs and benefits, but "none of the studies we reviewed separately estimated the costs of the Buy America program's requirements."5966 Highway projects most affected by Buy America are bridges because of the amount of iron and steel required. Transit projects most affected by Buy America are rail rolling stock and bus procurement.
Buy America rules prohibit customers from buying less expensive steel from overseas suppliers for use in public works projects. A project sponsor, however, can apply for a waiver if inclusion of domestically produced iron, steel, or manufactured goods would increase the overall cost of the project by more than 25%. The price of steel produced in the United States tends to be higher than that of comparable steel produced in other countries.6067 For example, the benchmark average U.S. hot-rolled band price over the past decadein recent years has consistently been higher than the Chinese price and, in most years, has been higher than the Western European price (Figure 3). However, higher transportation costs for imported steel may reduce or eliminate its cost advantage at a particular project site.
Source: Hot-rolled band price data from World Steel Dynamics Steelbenchmarker. Data reflect the mill-gate price and do not include freight, insurance, handling, import tariffs, and other associated costs.
In 2015In 2013, for example, the average price of domestic hot-rolled band was about $290200 per metric ton higher than the price of the same product made in China. Industry estimates suggest that freight, insurance, and handling from Asia to ports on the Pacific and Gulf coasts would have added about $60 per metric ton to the import price, leaving a Chinese cost advantage of $230140 per ton at dockside.6168 The differential with respect to a particular project would also depend on the costs of moving steel from a domestic mill or a port to the job site. Both steel costs and freight transportation costs can vary significantly over time due to global steel demand, energy prices, exchange rates, and other factors.
Source: Hot-rolled ban price data from World Steel Dynamics Steelbenchmarker. Data reflect the ex-works or free on board (FOB) mill price. These data do not include freight, insurance, handling, import tariffs, and other associated costs.
The FY2009 Defense Act (Duncan Hunter National Defense Authorization Act (NDAA; P.L. 110-417, §3511) established cargo preference requirements for imported materials purchased by state and local governments and private organizations with federal financial assistance. The requirements have the potential to raise costs of transportation projects and contribute further to delays. Shipping rates for preference cargo aboard U.S.-flag vessels tend to be higher than those for similar cargo on foreign-flag vessels, and services are less frequent, as the number of U.S.-flag commercial vessels providing international service is much smaller than the number of foreign-flag vessels serving the United States.6774 On balance, imported materials purchased under Buy America waivers will generally be less attractive to project sponsors if the imported products are subject to cargo preference.
broadening Buy America restrictions to other parts of the transportation system or to nontransportation sectors.
Congress could modify Buy America by making it more restrictive. Most bills introduced in the 114th Congress propose tightening existing domestic preference laws.
Congress could modify Buy America by making it more restrictive.
The FAST Act, enacted in December 2015, did this by increasing the share of public transit rolling stock components and subcomponents that must be produced in the United States. Other bills, such as the Invest in American Jobs Act of 2015 (S. 1043, 114th Congress), introduced by Senators Merkley and Baldwin, have proposed increasing the share to 100%.
More technical changes to tighten Buy America are contained in the Buy American Improvement Act of 2017 (H.R. 904), introduced by Representative Lipinski. This bill proposes to subject rolling stock purchased using highway funds administered by FHWA to the same Buy America requirements as those purchased with funds administered by FTA. It would also require FHWA to reevaluate its waiver of Buy America rulesregulations for manufactured products predominantlyother than those made of iron and steel. Moreover, it would require FTA to develop audit requirements and best practices for documenting compliance with Buy America, and includes initiating a new rule for standards by which to measure the percentage value of a component relative to the entire procurement. The bill would require Amtrak to contract with the National Institute of Standards and Technology (NIST) to search for domestic suppliers of products before seeking a waiver.7277 FAA would be required to do a similar search for domestic suppliers. The bill also would apply Buy America requirements to projects financed with local passenger facility charges, federally authorized fees collected from airline passengers by certain airport operators.
There are no legislative proposals in the 114115th Congress to loosen Buy America requirements substantially. Two proposed provisions in the DRIVE Act would114th Congress proposed to make Buy America somewhat less restrictive. The DRIVE Act would raiseFAST Act included one of these provisions, raising the threshold for purchases in public transportation subject to Buy America requirements from $100,000 to $150,000. It would also subject Amtrak to Buy America requirements only for purchases of $5 million or more, as opposed to the current threshold of $1 million.
There have also been proposals to extend some requirements that apply to ships in domestic trade to ships that are used to export liquefied natural gas (LNG) and crude oil. The Jones Act, a maritime law, requires that a vessel carrying passengers or cargo between U.S. points must be built in the United States, crewed by U.S. citizens, and be at least 75% owned by U.S. citizens.76 According to 46 C.F.R. Section 67.97, to be considered U.S.-built a vessel must meet two requirements: "(a) all major components of its hull and superstructure are fabricated in the United States; and (b) the vessel is assembled entirely in the United States." These requirements do not currently apply to vessels engaged in international trade.
LNG can currently be exported, but federal approval is needed.77 Crude oil exports are not generally permissible under current law, although there are some circumstances under which exports are allowed.78 During markup of the Coast Guard and Maritime Transportation Act of 2014 (H.R. 4005), an amendment was offered to require that LNG exports be carried in U.S.-flag and eventually in U.S.-built tankers; the amendment was subsequently withdrawn.79 A law generally allowing U.S. exports of crude oil could also come with a requirement that such shipments be limited to U.S.-flag and U.S.-built ships.80 Such laws would effectively extend Buy America-like requirements to vessels constructed by private companies without U.S. government financial involvement.
Another recent proposal to broaden Buy America was the Make It in America: Create Clean Energy Manufacturing Jobs in America Act (H.R. 1524, 113th Congress). This bill proposed requiring clean-energy goods and equipment purchased by states with federal funding, such as wind turbines and solar panels, to meet an 85% American-made content threshold. H.R. 1524 would also have required 85% U.S. content of purchases for which private companies claim the Renewable Energy Investment Tax Credit and the Renewable Energy Production Tax Credit.
Another proposal to broaden Buy America was the Make It in America: Create Clean Energy Manufacturing Jobs in America Act (H.R. 1524, 113th Congress). This bill proposed requiring clean-energy goods and equipment purchased by states with federal funding, such as wind turbines and solar panels, to meet an 85% American-made content threshold. H.R. 1524 would also have required 85% U.S. content of purchases for which private companies claim the Renewable Energy Investment Tax Credit and the Renewable Energy Production Tax Credit.
Another bill in the 115th Congress, S. 181, introduced by Senator Brown, would seek to apply Buy America to federal infrastructure-related programs where there are currently no such requirements. It would also broaden Buy America requirements to include other construction materials such as nonferrous metals, plastic pipes, concrete, glass, lumber, and insulation.
4. Waived "if the cost of imposing requirements is unreasonable"
All steel and manufactured goods must be produced in the United States. Preference does not apply if more than 60%, by value, of all components and subcomponents of the facility or equipment are produced domestically and final assembly is in the United States.
Source: CRS, adapted from U.S. Department of Transportation, Buy America Provisions—Side-by-Side, http://www.transportation.gov/buy-america-provisions-side-side-comparison.
Amber Wilhelm, Graphics Specialist, provided assistance with the figure and graphicsfigures in this report.
Buy America restrictions date to the passage of the Surface Transportation Assistance Act of 1978 (STAA; P.L. 95-599).
2. See CRS Report R43354, Domestic Content Restrictions: The Buy American Act and Complementary Provisions of Federal Law, coordinated by [author name scrubbed] et al.
The White House, Office of the Press Secretary, "President Trump Promotes 'Buy American and Hire American,'" Press Release, April 18, 2017, https://www.whitehouse.gov/the-press-office/2017/04/18/president-trump-promotes-buy-american-and-hire-american. 4. See CRS Report R43388, Transportation Spending and "Buy America" Requirements, by [author name scrubbed].
The term rolling stock covers various kinds of transit vehicles such as buses, vans, rail cars, locomotives, and streetcars.
A side-by-side comparison of the Buy America provisions applying to various U.S. Department of Transportation (DOT) agencies can be found at http://www.transportation.gov/highlights/buyamerica. Programs administered by the Maritime Administration are not subject to Buy America requirements, but they are subject to other domestic preference restrictions that derive from earlier statutes such as the Jones Act (§27, Merchant Marine Act of 1920, P.L. 66-261).
For example, in 1978 Pennsylvania enacted the Steel Products Procurement Act, which requires suppliers contracting with a public agency to use U.S.-made steel unless the head of a public agency determines that the required steel products are not produced domestically in sufficient quantities. 73 Pa. S. §§1881 et seq. Several other states have enacted some form of domestic steel preference legislation, including Maryland, Texas, and West Virginia. See Government Accountability Office (GAO), Federal-Aid Highways: Federal Requirements for Highways May Influence Funding Decisions and Create Challenges, but Benefits and Costs Are Not Tracked, GAO-09-36, p. 28, December 2008.
48 Federal Register 1946 (Interim Final Rule, January 17, 1983); 48 Federal Register 53099, 53103 (Final Rule, November 25, 1983).
Federal Highway Administration, "Clarification of Manufactured Products under Buy America," memorandum from John R. Baxter, Associate Administrator for Infrastructure to FHWA Division Administrators, December 21, 2012, https://www.fhwa.dot.gov/construction/contracts/121221.cfm.
Federal Highway Administration, 60 Federal Register 15478-15479, March 24, 1995, http://www.gpo.gov/fdsys/pkg/FR-1995-03-24/pdf/95-7362.pdf.
FTA's Buy America regulations define a component as "any article, material, or supply, whether manufactured or unmanufactured, that is directly incorporated into the end product at the final assembly location" (49 C.F.R. §661.3). Moreover, "a component is considered to be manufactured if there are sufficient activities taking place to advance the value or improve the condition of the subcomponents of that component; that is, if the subcomponents have been substantially transformed or merged into a new and functionally different article" (49 C.F.R. §661.11(e)).
See Letterletter from Joseph Szabo, Administrator of the, Federal Railroad Administration, to Jeff Martin, Chief Logistics OfficersOfficer, Amtrak, "Re: Request for a Buy American Exemption for Acela Power Car Central Block Assemblies," March 7, 2012, available at https://www.fra.dot.gov/eLib/Details/L04370. The FRA has been delegated authority fromby the Secretary of Transportation to evaluate requests from Amtrak for exemptions from these requirements. Federal Railroad Administration, "Buy America Frequently Asked Questions," at 11, https://www.fra.dot.gov/eLib/Details/L02740, p. 11.
China, India, Russia, and Brazil are not signatories of the WTO GPA.
The thresholds differ depending on the type of procurement and the level of government making the purchase.
More than three dozen states have voluntarily waived most Buy America provisions for state procurement. Several large manufacturing states, including Georgia, Indiana, New Jersey, Virginia, and Ohio, have not agreed to comply with the GPA (see Annex 2 of the U.S. GPA Agreement). For more information on the United States' international procurement obligations, see https://ustr.gov/issue-areas/government-procurement/additional-information-on-US-Procurement.
Revised WTO GPA Annex 2, note 5 ("For the state entities included in this Annex, this Agreement does not apply to restrictions attached to federal funds for mass transit and highway projects."); and Alliance for American Manufacturing, Buy America Works, Longstanding United States Policy Enhances the Job Creating Effect of Government Spending, February 2010, pp. 7-8, http://www.mcwane.com/upl/downloads/library/buy-america-works.pdf.
Office of the United States Trade Representative, "U.S.-Canada Agreement on Government Procurement," press release, February 16, 2010, http://tcc.export.gov/static/node2319.asphttps://ustr.gov/issue-areas/government-procurement/us-canada-agreement-government-procurement.
The application of the law to nonfederal entities is codified at 46 U.S.C. §55305. 46 C.F.R. §381.7 indicates cargo preference includes cargoes that are generated by a federal grant, guaranty, loan, and/or advance of funds program, and applies to the borrower, grantee, and any of their contractors or subcontractors.
See, http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201504&RIN=2133-AB74Maritime Administration email communication with CRS, June 7, 2017.
Communication from Federal Highway Administration to CRS, October 27, 2015, "Cargo Preference Act and Federal-aid Projects," Letter from Chief Counsel, December 8, 2015, https://www.fhwa.dot.gov/construction/cqit/cargo/151208.cfm.
80 Federal Register 22611, April 22, 2015. Comments filed by U.S. shipbuilders and domestic ocean carriers in response to the proposed policy clarification argued that the requirement would severely disrupt shipbuilding supply chains. For additional background see CRS Report R44831, Revitalizing Coastal Shipping for Domestic Commerce, by [author name scrubbed]. 24 22611, April 22, 2015. For comments filed, see http://www.regulations.gov, searching under docket no. "MARAD 2015-0049" and "MARAD 2011-0082." Comments filed by "McKeever-Bloom" and "Overseas Shipholding Group" question MARAD's authority. Comments filed by U.S. shipbuilders and domestic ocean carriers contend that the requirement would severely disrupt shipbuilding supply chains.
David Barboza, "Bridge Comes to San Francisco With a Made-in-China Label," New York Times, June 25, 2011.
Gloria M. Shepherd, Application of Buy America to non FHWA-funded Utility Relocations, FHWA, July 11, 2013, http://www.fhwa.dot.gov/construction/contracts/130711.cfm.
Federal Transit Administration, "Fact Sheet: Buy America, 5323(j)," https://www.transit.dot.gov/sites/fta.dot.gov/files/docs/Buy_America_Fact_Sheet.pdf.
Executive Memorandum, "Construction of American Pipelines," 82 Federal Register 8659, January 30, 2017, https://www.gpo.gov/fdsys/pkg/FR-2017-01-30/pdf/2017-02031.pdf.
Executive Order, "Buy American and Hire American," April 18, 2017, https://www.whitehouse.gov/the-press-office/2017/04/18/presidential-executive-order-buy-american-and-hire-american.
Direct reduction technology is used to produce iron ore in a thermal, natural gas-based process. The ore is turned into a pellet, lump, or briquetted form and transformed to steel in electric arc furnaces. CRS calculation based on American Iron and Steel Institute (AISI), 2015 Annual Statistical Report, June 14, 2016, p. 69; and Midrex, 2015 World Direct Reduction Statistics, June 30, 2016, p. 8.
The United States depleted its high-quality red iron ore deposits in the 1950s. Thereafter, the mining industry developed new technologies that allowed for the processing of lower-quality ore into pellets. Pelletizing involves crushing iron ore, grinding it into a powder, rolling the powder into balls, and firing the balls in a furnace to produce marble-sized pellets that contain 60% to 70% iron.
See U.S. Department of Transportation, "General Material Requirements: Buy America Requirements," 60 Federal Register 15478-15479, March 24, 1995, http://www.gpo.gov/fdsys/pkg/FR-1995-03-24/pdf/95-7362.pdf.
In 2015, FHWA denied a waiver request from two major slab converters, California Steel Industries and NLMK. See letters from Walter C. Waidelich, Jr., Associate Administrator for Infrastructure, to Gary Lee Moore, Interim Executive Director, Port of Los Angeles, February 3, 2015, and to Robert Miller, President, NLMK USA, April 9, 2015.
The letters are available to congressional clients from the report authors upon request.
Steel slab converters include firms such as California Steel Industries (CSI), which produces a portion of its hot-rolled, cold-rolled, and galvanized sheet from domestic slab, but imports much more of its semifinishedsemi-finished feedstock from foreign suppliers. Because of this, a significant portion of CSI's California-finished steel is unusable in most federal projects. See CSI, California Steel Industries, Presentation to Assembly Committee on Jobs, Economic Development, and the Economy, November 6, 2013.
"SMA digs in to defend against attack on Buy America rules," American Metal Market Daily, November 4, 2015.
31Letter from Philip K. Bell, President, Steel Manufacturers Association, to Earl Comstock, Director, Office of Policy and Strategic Planning, U.S. Department of Commerce, April 7, 2017, http://steelnet.org/sma-comments-on-construction-of-pipelines-using-domestic-iron-and-steel/.
Justin Ganderson, Frederic Levy, and Sandy Hoe et al., Key Takeaways From President Trump's "Buy American" Executive Order, Covington, Inside Government Contracts, April 2017, https://www.insidegovernmentcontracts.com/2017/04/key-takeaways-president-trumps-buy-american-executive-order/.
A 2008 GAO report looked at the benefits and costs of the Buy America program, but GAO was unable to find a source that tracked resulting demand for American-made products. GAO, Federal-Aid Highways: Federal Requirements for Highways May Influence Funding Decisions and Create Challenges, but Benefits and Costs Are Not Tracked, GAO-09-36, p. 20-1, December 2008.
American Iron and Steel Institute (AISI), 2014AISI, 2015 Annual Statistical Report (ASR), June 26, 201514, 2016, Table 12, Shipments of Steel Mill Products by Market Classification, All Grades, 20142015, pp. 29-31.
AISI, 20142015 ASR, June 26, 201514, 2016, Table 11, Net Shipments of Steel Mill Products by Market Classification, All Grades, 20142015, pp. 27-28.
AISI, Profile 20152016, p. 4.
Peter Morici, Alan H. Price, and Thomas A. Danjczk, "Melt It Here: The Benefits of Expanding Steel Production in the United States," Steel Manufacturers Association, December 2013.
Bureau of Labor Statistics, Quarterly Census of Employment and Wages. Average annual pay in steel product manufacturing was $62,701 in 201463,138 in 2015, very close to the average for all manufacturing.
The U.S. market for railroad freight cars is larger than the market for passenger equipment. According to Railway Age, deliveries of freight cars and platforms totaled approximately 62,400 units in 2016, a decrease from nearly 83,000 units in 2015. With 59,500 units forecast for 2022, annual deliveries of freight cars are expected to remain below recent production levels over the next few years. See William C. Vantuono, "Railcar Production Improvement," Railway Age, May 3, 2017. 43. Robert MilesRailway Age predicts freight car deliveries will total 85,000 units and platforms in 2015, and it expects deliveries to remain at an annual level of some 75,000 cars through 2020. See William C. Vantuono, "2015 Freight Car Deliveries: 85,000," Railway Age, March 1, 2015.
Lucas Isakowitz, Train, Subway & Transit Car Manufacturing in the US, IBISWorld, November 2014, p. 14January 2017, p. 40.
Railroad rolling stock is a broad term covering the manufacturing of various types of transportation equipment including locomotives, freight and intercity passenger rail cars, and public transportation rail cars. The U.S. North American Industry Classification System (NAICS) code is 33651.
First Research, Railroad Equipment Manufacturing, Full Industry Profile, June 8, 2015; and Lucas Isakowitz, p. 18Robert Miles, Train, Subway & Transit Car Manufacturing in the US, p. 15.
Massachusetts Department of Transportation, "Governor Baker, Springfield Mayor Sarno, CRRC Vice President Yu Celebrate Groundbreaking for $95M Rail Car Manufacturing Facility," press release, September 30, 2015, http://www.massdot.state.ma.us/transit/main/tabid/1079/ctl/detail/mid/980/itemid/620/Governor-Baker--—Springfield-Mayor-Sarno--—CRRC-Vice-President-Yu-Celebrate-Groundbreaking-for--—95m-Rail-Car-Manufacturing-Facility.aspx.
Jim Kinney, "New Train Deals Mean More Work, Workers for CRRC MA Springfield Plant," Masslive.com, April 7, 2017.
Bombardier, Inc., "Profile, Strategy and Market," February 2015, pp. 68-72, http://ir.bombardier.com/images/ckeditor/staging/upload/ckeditor/files/BInc-Profile-Strategy-and-Market-FEB-2015-en3.pdf.
First Research, Railroad Equipment Manufacturing, Full Industry Profile, June 8, 2015March 20, 2017.
Marcy Lowe, Saori Takuoka, and Kristen Dubay et al., U.S. Manufacture of Rail Vehicles for Intercity Passenger Rail and Urban Transit, Center on Globalization Governance & Competitiveness, A Value Chain Analysis, June 24, 2010, pp. 37-44.
Michael Renner and Gary Gardner, Global Competitiveness in the Rail and Transit Industry, September 2010, http://www.worldwatch.org/system/files/GlobalCompetitiveness-Rail.pdf.
These figures do not include rebuilt deliveries. In 2014, new and rebuilt deliveries totaled 1,103 units. Of those, the majority were new cars.
Douglas John Bowen, "2015"2016 Passenger Rail Outlook," Railway Age, January 20152017, p. 5247.
5055. Iris Peters, Keep on trucking: Adoption of new fuel-efficient technologies will support industry growth, .
Joan Fitzgerald et al., Reviving the U.S. Rail and Transit Industry: Investments and Job Creation, Worldwatch Institute, September 2010, p. 13, http://www.worldwatch.org/system/files/Reviving-the-US-Rail-and-Transit-Industry.pdf.
Brandon Ruiz, Rolling on: Revenue will rise, but emerging economies will lure operators overseas, Truck & Bus Manufacturing in the US, IBISWorld, March 2015January 2017, pp. 14-15.
American Public Transportation Association, 20152016 Public Transportation Fact Book, Appendix A: Historical Tables, Table 25, June 2015April 2016, pp. 121-122123.
Stan Voas, The Lean Manufacturing Journey, New Flyer, September 17, 2014, p. 4, http://www.enterpriseminnesota.org/assets/business_events/Sept_2014-_Stan_Voas_-_New_Flyer_Lean_Manufacturing_Journey.pdfNew Flyer, Annual Information Form, March 24, 2017, p. 28.
MORR Transportation Consulting Prepared for American Public Transportation Association, An Analysis of Transit Bus Axle Weight Issues, November 2014, p. 30, https://www.apta.com/resources/reportsandpublications/Documents/An-Analysis-of-Transit-Bus-Axle-Weight-Issues-TCRP-J11-T20.pdf.
New Flyer Industries, New Flyer Investor Presentation, August 6, 2015, p.5, http://www.newflyer.com/index/cms-filesystem-action/investor_relations/events%20and%20presentations/nfi%20company%20overview%20aug%206-15%20final.pdfUpdate, May 12, 2017, p. 7, https://www.newflyer.com/investor-relations/test.
On November 10, 2015, New Flyer announced the acquisition of Motor Coach Industries International, which has a manufacturing facility in North Dakota. "New Flyer Announces Acquisition of MCI, North America's Leading Motor Coach Manufacturer, Parts and Service Company," New Flyer Press Release, November 10, 2015, http://www.newflyer.com/index/cms-filesystem-action/investor_relations/news%20releases/2015/2015-11-10-acquisition.pdf.
Christopher Rauwald, "Daimler to Revamp North American Bus Operations," Wall Street Journal, April 25, 2012.
58David Czerwinski, Xu Hartling, and Jing Zhang, The U.S. Transit Bus Manufacturing Industry, Mineta Transportation Institute, Report 12-66, October 2016, p. 10, http://transweb.sjsu.edu/PDFs/research/1234-US-transit-bus-mfg-industry.pdf.
James Bow and Robert Lubinski, A Brief History of Orion Bus Industries, Transit Toronto, January 6, 2017, http://transit.toronto.on.ca/bus/8509.shtml.
New Flyer, "New Flyer Announces Acquisition of North American Bus Industries, Inc., and Extends Senior Credit Facility to 2017," press release, June 21, 2013, http://www.newflyer.com/index/news-app/story.144.
Barbara Eldredge, "Chinese Electric Bus Company Plans to Take the U.S. by Storm," Curbed, September 23, 2016, https://www.curbed.com/2016/9/23/12992358/electric-busses-cars-byd-auto-california.
GAO, Federal-Aid Highways, 2008, p. 15.
Ibrahim Yucel, Steeling the show: Import competition and falling prices will interrupthinder industry recoverygrowth, IBISWorld Industry Report 3311, July 2015October 2016, p. 8.
Steel MarkerMarket Update, Steel Buyers Basics, p. 15, https://www.steelmarketupdate.com/resources-mobile/steel-buyers-basics.
Shanjun Li, Matthew E. Kahn, and Jerry Nickelsburg, "Public Transit Bus Procurement: The Role of Energy Prices, Regulation, and Federal Subsidies," Journal of Urban Economics, Vol. 87, pp. 57-71, May 2015.
Battelle, TheThe Costs of Complying with Federal-aid Highway Regulations, draft report prepared for the Federal Highway Administration, August 2008. A final report was never published.
See, for example, California Department of Transportation, "Buy America Utility Relocation Challenges in California," May 16, 2013, http://napolitano.house.gov/sites/napolitano.house.gov/files/documents/BuyAmericaUtilityRelocationChallengesinCaliforniaFinal.pdf.
Letter from the Secretary of Transportation to Anthony Marnell, Chairman, Xpress West, June 28, 2013. See also Stephens Tetreault, "Feds: XPressWest Failed to Meet Buy America Rules for High-Speed Train," Las Vegas Review Journal, July 16, 2013, httphttps://www.reviewjournal.com/news/traffic-transportationtraffic/feds-xpresswest-failed-to-meet-buy-america-rules-for-high-speed-train/. According to press reports, the project is still being actively pursued, possibly with financing and high-speed train technology from China. See, Julie Makinen and Dan Weikel, "A high-speed rail from L.A. to Las Vegas? China says it's partnering with U.S. to build," Los Angeles Times, September 17, 2015.
Kevin M. Sheys and Robert L. Gunter, "Requirements That Impact the Acquisition of Capital-Intensive Long-Lead Items, Rights of Way, and Land for Transit," Transit Cooperative Research Program, Legal Research Digest, number 6, December 1996.
CRS Report R44254, Cargo Preferences for U.S.-Flag Shipping, by [author name scrubbed].
GAO, Federal-Aid Highways, 2008, pp. 23-23.
Cliff Henke, "Buy America: Why Do Policymakers Keep Trying to Fix what's Not Broken?," Metro Magazine, September/October 2014, pp. 12-24.
The Truman-Hobbs Act of 1940 requires the federal government to share in the cost of upgrading bridges considered navigational hazards.
Federal Transit Administration, GROW America Act, Summary of Federal Transit Administration Provisions, p. 3, http://www.dot.gov/sites/dot.gov/files/docs/Summary_of_Federal_Transit_Administration_Provisions_1.pdf.
This practice is known as supplier scouting. An established service at NIST is the Hollings Manufacturing Extension Partnership, http://www.nist.gov/mep/.
Both provisions were included in the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act (H.R. 22, 114th Congress).
The Surface Transportation Reauthorization and Reform Act of 2015 (H.R. 3763), a six-year surface transportation bill reported out of the Transportation and Infrastructure Committee on October 22, 2015, was incorporated into H.R. 22 as amended by the Senate.
See, for example, Railway Supply Institute, "Rail Supply Innovation and Buy America Requirements," http://www.rsiweb.org/pdfsfiles/whitepaper_buyam_26apr11.pdf.
81. See Division G, Section 436.
For more on the Jones Act, see CRS Report RS21566, The Jones Act: An Overview, by [author name scrubbed].
42 U.S.C. §6212; 15 C.F.R. §754.2.
H.Rept. 113-384, Howard Coble Coast Guard and Maritime Transportation Act of 2014, p. 27.
H.R. 702, a bill passed by the House on October 9, 2015, would remove restrictions on the export of crude oil. The bill does not contain a requirement that such shipments be carried on U.S.-flag and U.S.-built ships.

References: §3511
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