Court Opinion

ID: 621000
Source: CourtListenerOpinion
Date Created: 2012-01-17 17:58:52+00
Date Added: 2024-06-11T09:14:30.304678
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 09-1314

                  ANTILLES CEMENT CORPORATION,

                      Plaintiff, Appellee,

                               v.

    LUIS FORTUÑO, Governor of the Commonwealth of Puerto Rico;
   ANTONIO M. SAGARDÍA-DE-JESÚS, Secretary of the Department of
  Justice; LUIS G. RIVERA-MARÍN, Secretary of the Department of
 Consumer Affairs; RUBEN A. HERNÁNDEZ-GREGORAT, Secretary of the
          Department of Transportation and Public Works,

                     Defendants, Appellants,

CEMEX DE PUERTO RICO, INC., f/k/a Puerto Rican Cement Co., Inc.,

                           Defendant.

No. 09-1583

                  ANTILLES CEMENT CORPORATION,

                      Plaintiff, Appellee,

                               v.

 CEMEX DE PUERTO RICO, INC., f/k/a Puerto Rican Cement Co., Inc.

                      Defendant, Appellant,

      LUIS FORTUÑO, Governor of the Commonwealth of Puerto Rico;
   ANTONIO M. SAGARDÍA-DE-JESÚS, Secretary of the Department of
  Justice; LUIS G. RIVERA-MARÍN, Secretary of the Department of
 Consumer Affairs; RUBEN A. HERNÁNDEZ-GREGORAT, Secretary of the
           Department of Transportation and Public Works,

                           Defendants.
          APPEALS FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF PUERTO RICO

         [Hon. Jamie Pieras, Jr.,   U.S. District Judge]

                              Before

                   Howard, Selya and Thompson,
                         Circuit Judges.

     Angel E. Rotger-Sabat, with whom Maymí, Rivera & Rotger,
P.S.C. was on brief, for appellant Commonwealth of Puerto Rico.
     Juan Ramón Cancio-Ortiz, with whom José Raúl Cancio-Bigas,
Charles E. Vilaró-Valderrábano and Cancio Covas & Santiago, LLP
were on brief, for appellant Cemex de Puerto Rico, Inc.
     Hector Saldaña-Egozcue, with whom Carlos Lugo-Fiol and Saldaña
& Saldaña-Egozcue, PSC were on brief, for appellee.

                         January 17, 2012
           HOWARD, Circuit Judge. These appeals present two complex

questions of first impression: Does the Buy American Act (BAA), 41

U.S.C. §§ 8301-8305 (formerly codified at 41 U.S.C. §§ 10a-10d),

preempt two Puerto Rico statutes?        And if not, do those Puerto Rico

statutes unconstitutionally interfere with Congress's power to

regulate foreign commerce?

           The district court initially struck down the two local

laws on   the     ground that   they   contravene the    dormant   Foreign

Commerce Clause.     Antilles Cement Corp. v. Calderón (Antilles I),

288 F. Supp. 2d 187, 197-202 (D.P.R. 2003).        On appeal, we vacated

that decision and remanded for consideration of the role of the

BAA. Antilles Cement Corp. v. Acevedo Vilá (Antilles II), 408 F.3d

41, 47-49 (1st Cir. 2005).        On remand, the district court again

invalidated the local laws, this time concluding that they are

preempted by the BAA.     We affirm in part and reverse in part.

I.   BACKGROUND

           We   presume   the   reader's   familiarity   with   our   prior

decision in this matter and recount here only the facts needed to

illuminate the issues under appeal.         Additional background may be

found in the related district court decisions. See Antilles Cement

Corp. v. Calderón (Antilles IV), No. Civ. 02-1643, slip op. (D.P.R.

Jan. 9, 2009); Antilles Cement Corp. v. Acevedo Vilá (Antilles

III), No. Civ. 02-1643, 2005 WL 2138753 (D.P.R. Sept. 1, 2005);

Antilles I, 288 F. Supp. 2d 187.

                                   -3-
                    A.    The Statutes at Issue.

           The BAA was enacted during the Great Depression to

promote American industry and jobs by requiring that certain public

projects use only domestically produced materials.           See United

States v. Rule Indus., Inc., 878 F.2d 535, 538 (1st Cir. 1989); see

also 76 Cong. Rec. 1892 (1933) (statement of Rep. John J. Cochran)

("In times such as we are now experiencing let us put American

labor to work on Government supplies and material."); see generally

Charles F.   Szurgot,    Comment,   The    Buy American   Act:   Reverse

Discrimination against Domestic Manufacturers; Implications of the

Trade Agreements Act of 1979 on the Rule of Origin Test, 7 Admin.

L.J. Am. U. 737, 739-40 (1993).           Specifically, the BAA ordains,

subject to certain exceptions, that only materials that are mined,

produced, and/or manufactured in the United States may be employed

for "public use" or utilized in the construction, alteration, or

repair of "any public building or public work."       41 U.S.C. §§ 8302-

8303. "Public building," "public use," and "public work" are terms

of art, defined as "a public building of, use by, and a public work

of, the Federal Government, the District of Columbia, Puerto Rico,

American Samoa, and the Virgin Islands."           Id. § 8301 (emphasis

supplied).

           We turn now to the two local laws that are challenged

here.   The first, P.R. Laws Ann. tit. 3, §§ 927-927h (Law 109), is

a preference statute enacted in 1985 to promote the Puerto Rican

                                    -4-
construction    industry.          It    requires     that   local   construction

projects financed with funds from the federal government or the

Commonwealth    use   only     "construction materials          manufactured     in

Puerto Rico," id. §§ 927a-927c, with certain limited exceptions

relating to the price, quality, and available quantity of local

materials, id. § 927e.             Of particular pertinence for present

purposes, cement is deemed "manufactured in Puerto Rico" only if it

is composed entirely of raw materials from Puerto Rico (unless a

particular    component      is    unavailable       in   industrial   quantities

locally).    Id. § 927(d).

            The second challenged statute is P.R. Laws Ann. tit. 10,

§ 167e   (Law 132).    Enacted in 2001, it imposes certain labeling

requirements on cement sold in Puerto Rico.                  Among other things,

Law 132 requires that foreign-manufactured cement carry a special

label warning against its use in government-financed construction

projects unless one of the exceptions contained in the BAA and Law

109 applies.     See id. § 167e(a)(4).              Law 132 also prohibits the

sale or distribution of foreign-manufactured cement that is not so

labeled and     imposes    fines        for   any   violation of     the   labeling

requirements.    See id. §§ 167e(b), 167f.

                          B.      Travel of the Case.

            Antilles Cement Corporation, a firm that imports foreign

cement, commenced this action by filing a complaint in the United

States District Court for the District of Puerto Rico.                     Antilles

                                          -5-
sought a declaratory judgment that Laws 109 and 132 violate the

dormant Foreign Commerce Clause and conflict with the BAA.                In the

early going, Antilles amended its complaint to withdraw the BAA

preemption claim.

             The district court initially granted summary judgment for

Antilles, concluding that Laws 109 and 132 as applied to foreign

materials    violate   the   dormant     Foreign   Commerce     Clause.      See

Antilles I, 288 F. Supp. 2d at 197-202.               On direct review, we

questioned whether the BAA might preempt the laws being challenged,

thereby obviating the need for constitutional analysis.                      See

Antilles II, 408 F.3d at 47-49.            Moreover, we found the record

lacking in factual development.          See id. at 49-51.        Given these

concerns, we vacated the lower court's decision and remanded to

determine (1) whether the BAA applies to public projects undertaken

by the Commonwealth of Puerto Rico, and, if so, whether it preempts

Law   109;   (2)   whether   Law   109   has   been   applied    only   to   the

Commonwealth's own construction projects or, conversely, whether it

has been applied to private construction projects subsidized in

part by government funds;1 and (3) whether the status of Law 132

was altered in light of the answers to these first two questions.

See id. at 51.

      1
      This factual determination is relevant to whether the
Commonwealth acts as a market participant or a market regulator
when it enforces Law 109.

                                     -6-
           On remand, the district court concluded that the BAA

applies to public projects undertaken by the government of Puerto

Rico.   See Antilles IV, No. Civ. 02-1643, slip op. at 58-64.           It

further concluded that the BAA preempts Laws 109 and 132 because

the Puerto Rico statutes limit the use of foreign construction

materials more stringently than the BAA requires.          Id. at 64-66.

In view of this holding, the court recognized the lack of need for

further constitutional analysis.          Id. at 67.      Nonetheless, in

compliance with our mandate, the court determined that Law 109 has

been applied only to public works projects undertaken by the

Commonwealth itself.     Id. at 67-68.

           The Commonwealth and Cemex de Puerto Rico, Inc., an

intervenor, now appeal.

II.   PRELIMINARY MATTERS

           At   the   threshold,   we    must   address   the   appellants'

contention that Antilles lacks standing to challenge Laws 109 and

132 under a preemption theory.           According to the appellants,

Antilles stands to gain nothing by arguing that the BAA trumps the

Puerto Rico statutes; for even if Antilles successfully advances

that challenge, its cement would nevertheless remain barred from

use in the Commonwealth's public works projects under the terms of

the BAA itself.       Although the appellants failed to raise this

argument during the remanded proceeding, Article III standing is a

jurisdictional question that must be resolved whenever it arises.

                                   -7-
See Weaver's Cove Energy, LLC v. R.I. Coastal Res. Mgmt. Council,

589 F.3d 458, 467 (1st Cir. 2009).

            To establish Article III standing, Antilles must allege

"a concrete and particularized injury in fact, a causal connection

that permits tracing the claimed injury to the defendant's actions,

and a likelihood that prevailing in the action will afford some

redress for the injury."        Id. (internal quotation marks omitted).

The loss of sales resulting from the local laws' discrimination

against foreign cement is plainly a "concrete and particularized

injury" to Antilles that is traceable to the challenged laws.                  Our

inquiry must therefore focus on the final element of standing:

whether Antilles's injury will be redressed if Laws 109 and 132 are

held to be preempted by the BAA.

            To   carry   its    burden     of    establishing redressability,

Antilles need only show that a favorable ruling could potentially

lessen its injury; it need not definitively demonstrate that a

victory would completely remedy the harm.               See, e.g., Monsanto Co.

v. Geertson Seed Farms, 130 S. Ct. 2743, 2752-54 (2010) (holding

that plaintiffs had standing to challenge an injunction preventing

them from    planting    a     regulated       crop,   even   though   a   decision

vacating the injunction would enable plaintiffs only to petition

for partial deregulation); see also Weaver's Cove, 589 F.3d at 467-

68 (holding that a favorable decision would provide plaintiff

"effectual relief" by removing "a barrier to achieving approval"

even though additional regulatory hurdles would need to be cleared

                                         -8-
before   project   could    be    commenced).        Antilles    has    met    that

requirement    here.       As    we    explain    below,   the   BAA        provides

significantly greater opportunity than does Law 109 for suppliers

of foreign cement to participate in the Commonwealth's public

construction projects.      Accordingly, Antilles stands to benefit if

Law 109 is nullified, leaving the company subject only to the

looser strictures of the BAA.

            A simple side-by-side comparison of the BAA and Law 109

underscores the more formidable burden that the Puerto Rico statute

places on sellers of foreign cement.             For example, under the BAA,

a   construction   material       is    considered    "domestic"       if    it   is

manufactured in the United States and if the cost of its components

that were mined, produced, or manufactured in the United States

exceeds half of its total component cost.            See 48 C.F.R. § 25.003;

see also Exec. Order No. 10582, 19 Fed. Reg. 8723 (Dec. 17, 1954).

Pursuant to this definition, concrete manufactured from foreign

cement could be considered a domestic product (and thus eligible

for use in public paving projects) because, according to record

evidence, cement represents only about 42 percent of the cost of

concrete's components.          By contrast, Law 109 would rarely permit

the public use of concrete made with foreign cement due to its

requirement that all cement used in public works be manufactured

using raw materials from Puerto Rico.            See P.R. Laws Ann. tit. 3,

§ 927(d).     Obviously, the opportunities for Antilles to sell its

cement in Puerto Rico would be greater under the BAA because that

                                        -9-
law allows concrete manufacturers who sell to the Commonwealth to

purchase and employ foreign cement.

           The BAA also permits government purchasers to ignore the

domestic preference rule if adherence is impracticable or not in

the public interest, see 41 U.S.C. §§ 8302-8303, or if the domestic

material is greater than six percent more expensive than its

foreign counterpart, see id.; 48 C.F.R. § 25.204(b).                   Law 109's

exceptions are much narrower:        domestic preferences may be ignored

only when indigenous construction materials are not available in

sufficient      quantity   or   quality,    see   P.R.   Laws   Ann.    tit.   3,

§ 927e(b), or if the domestic material is at least fifteen percent

more expensive than a comparable foreign-made material, see id.

§ 927e(a); Antilles II, 408 F.3d at 44.                  Given the relative

strictness of Law 109's domestic preference requirements, Antilles

would be more likely to sell its cement to contractors carrying out

public works projects in Puerto Rico if that law were preempted by

the BAA.

           Law 132 is susceptible to a similar comparative analysis.

Unlike that law, the BAA does not impose any burdensome labeling

requirements on sellers of foreign cement.                 According to the

evidence   of    record,   those   idiosyncratic     labels     frighten    away

potential customers.

           In sum, Laws 109 and 132 place more onerous burdens on

Antilles than does the BAA.         Antilles has therefore demonstrated

                                     -10-
that its injury would at least be alleviated by a finding that the

BAA preempts Laws 109 and 132.

            One other bit of procedural underbrush must be cleared

before we    can proceed to the merits of these appeals.         The

appellants contend that Antilles waived its preemption claim by

failing to amend its complaint to reassert that claim after we sent

the case back to the district court. The district court determined

that it could consider the issue even without a formal amendment

because the Commonwealth and Cemex had fair warning that BAA

preemption would be litigated.     We review that determination for

abuse of discretion.    See Kenda Corp. v. Pot O'Gold Money Leagues,

Inc., 329 F.3d 216, 232 (1st Cir. 2003).

            Federal Rule of Civil Procedure 15(b) allows an unpleaded

claim to be considered when the parties' conduct demonstrates their

express or implied consent to litigate the claim. See Rodriguez v.

Doral Mortg. Corp., 57 F.3d 1168, 1172 (1st Cir. 1995).      The rule

provides in relevant part:

            When an issue not raised by the pleadings is
            tried by the parties' express or implied
            consent, it must be treated in all respects as
            if raised in the pleadings. A party may move
            — at any time, even after judgment — to amend
            the pleadings to conform them to the evidence
            and to raise an unpleaded issue. But failure
            to amend does not affect the result of the
            trial of that issue.

Fed. R. Civ. P. 15(b)(2).    A party can give implied consent to the

litigation of an unpleaded claim in two ways:    by treating a claim

introduced outside the complaint "as having been pleaded, either

                                 -11-
through [the party's] effective engagement of the claim or through

his silent acquiescence"; or by acquiescing during trial "in the

introduction of evidence which is relevant only to that issue."

Doral Mortg., 57 F.3d at 1172.

           Here, the appellants plainly gave their implied consent

to the adjudication of the preemption claim.          For one thing, they

never objected when it became clear that BAA preemption would be at

the heart of the remanded proceeding.           At its first scheduling

conference following remand, the district court discussed with the

parties the scope of the Antilles II mandate.             When the court

issued its scheduling order, it listed the BAA's preemptive effect

among the controverted issues.          There was no objection.          The

parties   then   engaged   in    extensive   discovery,   which    included

numerous matters related to the BAA and preemption.              Later, the

parties briefed several issues, including the applicability of the

BAA to Puerto Rico and its preemptive effect.          Throughout all of

these   proceedings,   the      appellants   never   suggested    that   BAA

preemption went beyond the scope of the issues properly before the

district court. Indeed, the appellants joined the preemption issue

by arguing that the BAA represented a congressional authorization

of the challenged statutes.

           By actively contesting the BAA preemption claim on the

merits, the appellants effectively conceded that it had been

incorporated into the complaint.           Moreover, given the extensive

notice that BAA preemption would be litigated upon remand, see,

                                    -12-
e.g., Antilles II, 408 F.3d at 47-49, the appellants cannot show

that they were prejudiced by the court's consideration of that

issue.2      We therefore uphold the district court's ruling that the

BAA preemption claim was properly before it.

III.       THE MERITS

               The parties have stipulated to the salient facts, and the

issues before us are legal in nature.            Those issues engender de

novo review.      See Morales Feliciano v. Rullán, 378 F.3d 42, 49 (1st

Cir. 2004).

                              A.   Preemption.

               According to the district court, Laws 109 and 132 unduly

restrict Puerto Rico's ability to procure foreign materials for its

public projects and, in the process, undermine the BAA's delicate

balancing of protectionism and foreign trade and its policy of

encouraging flexibility in procurement decisions. We do not agree.

               As a preliminary matter, the appellants concede (as they

must) that the BAA places restrictions on federal construction

projects in Puerto Rico. They likewise concede that Law 109, which

purports to govern public projects that are financed with either

       2
      The cases cited by the appellants in which implied consent
was not found are inapposite. See, e.g., United States v. Davis,
261 F.3d 1, 59 (1st Cir. 2001) (finding no abuse of discretion when
court denied plaintiff's belated request to amend complaint);
Rodriguez v. Banco Cent. Corp., 990 F.2d 7, 13-14 (1st Cir. 1993)
(affirming denial of motion to amend where claim raised far into
discovery); Campana v. Eller, 755 F.2d 212, 215-16 (1st Cir. 1985)
(same). In none of those cases did the parties, at the court's
direction, engage the issue in question.

                                    -13-
federal or Commonwealth funds, see P.R. Laws Ann. tit. 3, § 927(f),

is preempted by the BAA to the extent that it tries to restrict

federal projects in Puerto Rico.          But the appellants dispute the

district court's ruling that the BAA preempts Laws 109 and 132 as

they apply to public projects that are funded by the Commonwealth.

Refined to its bare essence, the appellants' argument is that the

Commonwealth has the same degree of sovereignty as the several

states;   and   that   because   the    BAA   does   not   pertain   to   state

governments, it should not be construed to restrict public projects

undertaken by Puerto Rico.

           We reject the appellants' contention that the BAA has no

application to Puerto Rico.        Whether and how a federal statute

applies to Puerto Rico is a question of Congressional intent.

Jusino Mercado v. Puerto Rico, 214 F.3d 34, 40 (1st Cir. 2000).

The critical inquiry in this instance, then, is whether Congress

intended for Puerto Rico to be treated as a state under the BAA.

See id. Because this poses a question of statutory interpretation,

we employ the usual tools.             See In re Pharm. Indus. Average

Wholesale Price Litig., 582 F.3d 156, 168 (1st Cir. 2009) (limning

general principles of statutory construction).              We must evaluate

the statute's language within the statutory scheme and look to the

legislative history and policy only if that language is unclear.

See Gen. Motors Corp. v. Darling's, 444 F.3d 98, 108 (1st Cir.

2006).

                                   -14-
           Under the express terms of the BAA (and leaving its

exceptions to one side), only domestic materials may be acquired

for "public use" or used in the construction, alteration, or repair

of any "public building" or "public work." 41 U.S.C. §§ 8302-8303.

The statute applies only to "a public building of, use by, and a

public work of, the Federal Government, the District of Columbia,

Puerto Rico, American Samoa, and the Virgin Islands."            Id. § 8301

(emphasis supplied). By its plain terms, then, the BAA encompasses

public construction projects undertaken by the government of Puerto

Rico.   We find this explicit language dispositive.              See In re

Pharm. Indus., 582 F.3d at 168 ("The Supreme Court has repeatedly

emphasized the importance of the plain meaning rule, stating that

if the language of a statute or regulation has a plain and ordinary

meaning,   courts   need   look   no   further   and   should    apply   the

regulation as it is written." (quoting Textron Inc. v. Comm'r of

Internal Revenue, 336 F.3d 26, 31 (1st Cir. 2003))).

           The appellants attempt to dampen the impact of the BAA's

plain language by arguing that the explicit reference to Puerto

Rico is a vestige of a time when Puerto Rico was a federally

administered territory.     They point out that, more than a decade

after the BAA's enactment in 1933, Puerto Rico was transformed from

a territory into a self-governing commonwealth.                 See Federal

Relations Act of 1950 (FRA), Pub. L. No. 81-600, 64 Stat. 319

(codified at 48 U.S.C. §§ 731b-731e).        In Cordova & Simonpietri

Insurance Agency Inc. v. Chase Manhattan Bank N.A., we recognized

                                  -15-
that, following the adoption of the FRA, federal statutes that had

applied to Puerto Rico as a territory might no longer pertain to it

in its capacity as a commonwealth.           649 F.2d 36, 38 (1st Cir.

1981).    The appellants argue that the BAA is such a statute.             They

contend that the BAA's framers would not have intended for the law

to apply to an autonomous commonwealth like Puerto Rico and that

the words "Puerto Rico" remain in the statute due only to the

inadvertence of subsequent Congresses.

            This argument is not without some force, but it is

defeated by the fact that Congress recently overhauled the BAA yet

left the words "Puerto Rico" intact.        See Act of Jan. 4, 2011, Pub.

L. No. 111-350, § 3, 124 Stat. 3677, 3830-33.           The stated purpose

of this overhaul was to clarify ambiguities in the BAA (and other

laws codified in Title 41 of the United States Code) and better

effect the intent of the drafters of those laws.          See id. § 2, 124

Stat. at 3677.      As part of this legislative refurbishment, among

other things, Congress restructured and re-enacted the BAA, removed

the "[Panama] Canal Zone" from the list of covered entities, and

rechristened the "United States" as "the Federal Government."              Yet

Congress did not delete the BAA's reference to Puerto Rico.            We can

think of no better indicator of Congress's intent to continue to

include    Puerto   Rico   within   the    reach   of   the   BAA   than   its

overhauling the BAA yet preserving the law's explicit application

to the Commonwealth.

                                    -16-
                 Even beyond this recent overhaul, we note that Congress

historically has been diligent in amending the BAA to remove

entities that it no longer intends to cover.                For example, when the

BAA was initially enacted, it expressly applied to the territories

of    Alaska      and   Hawaii.   But    when     Alaska    and   Hawaii   achieved

statehood,        Congress   amended    the     BAA   to   remove them     from its

purview.         See Hawaii Omnibus Act, Pub. L. No. 86-624, § 28, 74

Stat. 411, 419 (1960); Alaska Omnibus Act, Pub. L. No. 86-70, § 43,

73 Stat. 141, 151 (1959).          Congress's failure similarly to amend

the BAA following the FRA's enactment strongly suggests an intent

that the BAA continue to apply to Puerto Rico.                        See Caribbean

Tubular Corp. v. Fernandez Torrecillas, 67 B.R. 172, 175 (D.P.R.

1986) ("[H]ad Congress intended to oust Puerto Rico from the

coverage of the BAA it would have done so in 1959 when it excluded

Alaska and Hawaii.").

                 Cordova does not compel a different conclusion.3            There,

we observed that following passage of the FRA Puerto Rico now

enjoys "the degree of autonomy and independence normally associated

with a State of the Union."            649 F.2d at 41 (quoting Examining Bd.

of Eng'rs, Architects & Surveyors v. Flores de Otero, 426 U.S. 572,

594 (1976)).         But we recognized that Puerto Rico is not a state.

See        id.    (referencing    Puerto        Rico's      "unique     status   of

       3
      In Cordova, we determined that the Sherman Act applies in
Puerto Rico the same as it does in any state in part because the
law did not expressly refer to the Commonwealth. 649 F.2d at 42.
The BAA, by contrast, explicitly references Puerto Rico.

                                         -17-
Commonwealth").    Accordingly, although we now generally presume

that Congress intends its laws to have the same effect on Puerto

Rico as they do on any state, that presumption can be overcome by

"specific evidence" to the contrary or by "clear policy reasons

embedded in" a statute.   Id. at 42; see Jusino Mercado, 214 F.3d at

42 (listing "two possible avenues to differential treatment:     an

express direction in the statutory text or some other compelling

reason").   Here, the explicit reference to Puerto Rico in the BAA

and Congress's decision to retain that reference notwithstanding

its recent overhaul of the statute are overwhelming and express

evidence that Congress intends the BAA to apply to the Commonwealth

even though it does not apply to any of the fifty states.

            In an effort to blunt the force of this reasoning, the

appellants note that a 1988 amendment to the BAA added several

references to "Federal agenc[ies]." See Act of Aug. 23, 1988, Pub.

L. No. 100-418, §§ 7002, 7005, 102 Stat. 1107.     They assert that

this amendment demonstrates that the BAA applies only to the

federal government, not to the autonomous government of Puerto

Rico.   But the 1988 amendment did not eliminate the BAA's explicit

reference to Puerto Rico and, in all events, that amendment ceased

to be effective on April 30, 1996.     See id. § 7004.

            We also reject the appellants' asseveration that the

BAA's inclusion of Puerto Rico was impliedly repealed when Congress

passed the FRA.    It is a "cardinal rule . . . that repeals by

implication are not favored." Morton v. Mancari, 417 U.S. 535, 549

                                -18-
(1974) (quotation marks omitted). Implied repeal occurs only where

two acts are in irreconcilable conflict or when a later act "covers

the whole subject of the earlier one and is clearly intended as a

substitute."   Posadas v. Nat'l City Bank of N.Y., 296 U.S. 497, 503

(1936).

          Here, there is no basis for arguing that the FRA was

intended to replace the BAA (and, indeed, the appellants abjure any

such argument).    What is more, the BAA and the FRA coexist in

perfect harmony.   It is beyond hope of contradiction that the FRA

permits Congress to treat Puerto Rico differently from the states.

See Jusino Mercado, 214 F.3d at 40; Cordova, 649 F.2d at 42.    The

BAA does exactly that, imposing unique procurement restraints on

the Commonwealth's government. There is simply no conflict between

the FRA's granting of autonomy to Puerto Rico and the BAA's

imposition of rules applicable to the Commonwealth. Moreover, even

if the BAA and FRA were in irreconcilable conflict, the BAA holds

the trump card.    After all, Congress re-enacted the BAA in 2011,

making it the more recent expression of Congress's intent.      See

Pub. L. No. 111-350.

          We are also unpersuaded by the appellants' reliance on 48

U.S.C. § 734, which states that:   "The statutory laws of the United

States not locally inapplicable . . . shall have the same force and

effect in Puerto Rico as in the United States . . . ."   As we have

made pellucid, this provision is without force where Congress

intends to treat Puerto Rico differently from the states.       See

                                -19-
Jusino Mercado, 214 F.3d at 42.               By expressly including "Puerto

Rico" among the entities enumerated in the BAA, Congress plainly

intended the law to apply to the Commonwealth even though it does

not apply to the states.

              Equally misplaced is the appellants' reliance on the 1950

Act of Congress that granted Puerto Rico the right to ratify a

constitution.        Section 6 of that Act states that "All laws or parts

of laws inconsistent with this Act are hereby repealed." FRA, § 6,

64 Stat. at 320. We see nothing "inconsistent" between the BAA and

the   1950    Act.      Congress     is    permitted   to   treat   Puerto     Rico

differently despite its state-like status, Jusino Mercado, 214 F.3d

at 42, and the BAA is merely an instance of Congress exercising

that prerogative.4

              To say more on this point would be supererogatory.                We

conclude that the BAA by its express terms imposes restrictions on

public construction projects undertaken by the Commonwealth of

Puerto Rico.         But this conclusion, in and of itself, does not

resolve the preemption inquiry.              We turn next to the preemptive

effect, if any, of the BAA on the local laws at issue here.

              It is a matter of bedrock that "the Laws of the United

States . . . shall be the supreme Law of the Land; and the Judges

in    every    State    shall   be    bound      thereby,   any   Thing   in   the

      4
      At any rate, the 1950 Act repealed only "inconsistent" laws
then in existence; it has no effect on Congress's 2011 re-enactment
of the BAA.

                                          -20-
Constitution or Laws of any State to the Contrary notwithstanding."

U.S. Const. art. VI, cl. 2; see M'Culloch v. Maryland, 17 U.S. (4

Wheat.) 316, 427 (1819) ("It is of the very essence of supremacy,

to remove all obstacles to its action within its own sphere, and so

to modify every power vested in subordinate governments . . . .").

Consequently, state laws that "interfere with, or are contrary to

the laws of Congress" are void ab initio.     Gibbons v. Ogden, 22

U.S. (9 Wheat.) 1, 211 (1824); see Free v. Bland, 369 U.S. 663, 666

(1962) (stating that "any state law, however clearly within a

State's acknowledged power, which interferes with or is contrary to

federal law, must yield").     For preemption purposes, the laws of

Puerto Rico are the functional equivalent of state laws.   See P.R.

Dep't of Consumer Affairs v. Isla Petroleum Corp., 485 U.S. 495,

499 (1988).

          In determining the preemptive effect of a federal law, we

must look to the intent of Congress.     Altria Grp., Inc. v. Good,

555 U.S. 70, 76 (2008).       We begin with the presumption that a

federal act does not preempt an otherwise valid state law, and we

set aside that postulate only in the face of clear and contrary

congressional intent.   City of Columbus v. Ours Garage & Wrecker

Serv., Inc., 536 U.S. 424, 432 (2002).     In some instances, that

intent can appear haec verba on the face of a statute.   See, e.g.,

Sprietsma v. Mercury Marine, 537 U.S. 51, 58-59 (2002).      In the

absence of express language, however, we must look to the structure

and purpose of the statute.   See Barnett Bank of Marion Cnty., N.A.

                                 -21-
v. Nelson, 517 U.S. 25, 31 (1996).          For example, we can infer

Congress's intent to preempt an entire field of law when it enacts

a scheme of regulation "so pervasive as to make reasonable the

inference that Congress left no room for the States to supplement

it."   Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

By like token, when a state law directly conflicts with a federal

statute — such as where it is "physically impossible" to comply

with both laws or "where the state law stands as an obstacle to the

accomplishment and execution of the full objectives of Congress" —

we can presume that Congress intended preemption to occur.            La.

Pub. Serv. Comm'n v. FCC, 476 U.S. 355, 368-69 (1986).

           No express language in the BAA evinces an intent to

preempt state law.    Nor can we perceive any field that Congress

attempted to occupy through the enactment of the BAA.

           To be sure, Antilles proposes that Congress intended by

means of the BAA to exercise full dominion over "the field of

acquisitions of foreign products, insofar as Puerto Rico and the

other territories of the United States are concerned."        Appellee's

Br. at 33.   There are two problems with this concept.        First, the

BAA is the only federal statute that purposes to regulate Puerto

Rico's acquisitions of foreign products, and its scope is hardly

pervasive.   Second, there is a strong presumption that Congress

does not intend to preempt a field traditionally occupied by the

states   unless   Congress   makes   such   an   intention   "clear   and

manifest." Hillsborough Cnty., Fla. v. Automated Med. Labs., Inc.,

                                 -22-
471 U.S. 707, 715 (1985).     Puerto Rico's ability to spend its money

as it chooses is a basic aspect of its autonomy, and we cannot

believe that Congress intended to commandeer Puerto Rico's spending

power insofar as it relates to foreign products without making that

intent clear.

            Antilles suggests that Congress demonstrated its intent

to preempt Puerto Rico's procurement policies by enacting the BAA.

But this is little more than a tautology, and the Supreme Court has

cautioned against the tautological inference that whenever the

federal government steps into a field, its regulations will be

exclusive.    See id. at 717.     The Court added that "[s]uch a rule

. . . would be inconsistent with the federal-state balance embodied

in our Supremacy Clause jurisprudence."        Id.   Consistent with this

guidance, we conclude that the mere fact that Congress enacted the

BAA is not enough to evince a manifest intent to preempt all Puerto

Rico laws relating to the Commonwealth's purchase of foreign

products.

            Having determined that the BAA neither expressly preempts

Laws 109 and 132 nor preempts the field in which those statutes

operate, we are left with the question of whether there is any

irreconcilable     conflict between    the    BAA   and   those laws.    We

undertake this inquiry mindful that a state law must yield to a

federal     law   "when   compliance   with   both    state   and   federal

regulations is impossible or when state law interposes an obstacle

to the achievement of Congress's discernible objectives."           Grant's

                                   -23-
Dairy-Me., LLC v. Comm'r of Me. Dep't of Agric., Food & Rural Res.,

232 F.3d 8, 15 (1st Cir. 2000).

            It is surely possible to comply simultaneously with both

the BAA and the challenged Puerto Rico statutes.                  Laws 109 and 132

stiffen, but do not contradict, the protectionist requirements of

the BAA.    A few examples will serve to illustrate this point.

            Under    the   BAA,    Puerto       Rico    must    purchase       domestic

materials for use in public construction projects unless the cost

of comparable foreign materials would be at least six percent

lower.     See 48 C.F.R. § 25.204(b).              Law 109, however, demands

adherence to the domestic preference unless the foreign product is

at least fifteen percent cheaper. See Antilles II, 408 F.3d at 44.

Similarly, the BAA's domestic preference requirement can be waived

if a department head determines that it is not in the "public

interest."     41     U.S.C.      §§   8302(a)(1);          8303(b)(3).        Law   109

eviscerates this exemption.            Up and down the line, Law 109 imposes

more severe obstacles to the Commonwealth's ability to purchase

foreign    goods    than   does    the    BAA.         It    follows    that    if   the

Commonwealth is in compliance with Law 109, then it by definition

has satisfied the BAA's more relaxed standards.                        After all, the

greater necessarily includes the lesser.

            The district court implicitly agreed that it is possible

to comply with both the BAA and the challenged statutes.                              It

nonetheless found that the former preempted the latter because Laws

109 and 132 undercut Congress's aims.              We are not persuaded.

                                         -24-
          There is nothing unusual about a state supplementing a

federal statute with stronger regulations.            See, e.g., Attrezzi,

LLC v.   Maytag   Corp.,   436   F.3d    32,   41   (1st   Cir. 2006).   By

legislating in an area, Congress generally does "not mean that

States and localities [are] barred from . . . imposing further

requirements in the field."      Hillsborough Cnty., 471 U.S. at 717.

Thus, courts routinely have upheld state statutes that impose

tougher restrictions than their federal counterparts as long as the

state law does not undermine the purposes of the federal statute.

See, e.g., Cal. Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272,

288-92 (1987); Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366,

372 n.3 (1st Cir. 1980), abrogated on other grounds, Two Pesos,

Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992).            Conversely, state

statutes that flatly contradict policies embedded in a federal

statute are preempted.     See, e.g., Bonito Boats, Inc. v. Thunder

Craft Boats, Inc., 489 U.S. 141, 159-60 (1989).

          Among other things, then, determining whether state and

federal statutes can coexist requires us to consider the extent to

which their policy aims are harmonious.              See United States v.

Locke, 529 U.S. 89, 108 (2000).         The core policy of the BAA is the

protection of American industry (and, by extension, the American

worker) from foreign competition.          See Rule Indus., 878 F.2d at

538; Allis-Chalmers Corp., Hydro-Turbine Div. v. Friedkin, 635 F.2d

248, 257 (3d Cir. 1980); see also 76 Cong. Rec. 1893 (statement of

Rep. Riley J. Wilson) (explaining, in his role as the BAA's

                                   -25-
principal sponsor, that "the     purpose of this bill is to establish

a policy by the Government assuring the use of American materials

for the execution and carrying on of public works in every place

where the United States has jurisdiction"); 155 Cong. Rec. *S13321,

*S13322 (statement of Sen. Russ Feingold) (noting that the name of

the BAA "accurately describes its purpose:            to ensure that the

Federal Government supports domestic companies and domestic workers

by buying American-made goods").            Laws 109 and 132, which are

protectionist in nature, comport perfectly with that policy.

           Of   course,   the   BAA    makes   some   exceptions     to   its

essentially protectionist regime, and the Executive Branch has

sometimes blunted its thrust. See, e.g., Exec. Order No. 10582, 19

Fed. Reg. 8723 (Dec. 17, 1954).       But that nibbling around the edges

does not mean, as Antilles would have it, that the BAA embodies a

federal   policy   of   "allow[ing]     a   reasonable   flux   of   foreign

commerce."   Appellee's Br. at 36. The fact that either Congress or

the Executive Branch has determined, in particular circumstances,

that a covered entity is not bound by the BAA's strictures does not

show that the BAA manifests any type of pro-trade policy; those

exceptions merely recognize that the BAA's protectionist regime may

be impracticable in some situations.            Indeed, if the BAA were

concerned with encouraging international trade, then we would

expect a covered entity to be required to purchase foreign goods

when a BAA exception applies.         But that is not the case.      The BAA

simply gives covered entities the option to buy foreign goods in

                                  -26-
certain circumstances, but it never demands engagement in foreign

commerce. See, e.g., 41 U.S.C. §§ 8302(a)(1)-(2); 8303(b) (limning

situations where "Buy American" requirement does not apply); 48

C.F.R. § 25.204(b) (expressly permitting covered entity to ignore

cost exception to BAA).

           The district court found that Law 109 contravenes the

BAA's policy of encouraging "flexibility" in procurement decisions.

Leaving to one side whether "flexibility" is a "policy" indulging

the BAA, Law 109 strikes us as a manifestation of the flexibility

contemplated by the statute. The BAA sets a floor of protectionism

— not a ceiling.       It then invites the covered entities to build

upon that floor. For example, the BAA requires a covered entity to

procure domestic materials as long as their foreign counterparts

are not more than six percent cheaper; but the covered entity, if

it so chooses, can require a higher price discrepancy before it

looks overseas.       See 48 C.F.R. § 25.204(b).          By enacting Law 109,

Puerto Rico — as explicitly permitted by the BAA — has raised from

six to fifteen percent the price discrepancy that must exist before

the Commonwealth will purchase foreign materials.                  In doing so,

Puerto Rico has simply built upon the BAA's floor of protectionism.

See   Atherton   v.    FDIC,   519   U.S.    213,   227   (1997)   (finding   no

preemption where federal statute "provides only a floor" that "does

not stand in the way of a stricter standard that the laws of some

States provide").

                                      -27-
            A second example may also prove helpful. The BAA confers

upon a covered entity the option         — but not the obligation — to buy

foreign goods if it determines that doing so would be in the public

interest.    See 41 U.S.C. §§ 8302(a)(1); 8303(b)(3).            In Law 109,

Puerto Rico has declared its belief that purchasing foreign goods

for its own public works is never in the public interest.                  So

viewed, to the extent that the BAA embodies a policy of providing

covered entities with flexibility in procurement decisions, Law 109

is merely an outgrowth of that policy.           We find no conflict and,

therefore, no preemption.5

                   B.   Dormant Foreign Commerce Clause.

            Our conclusion that the BAA does not preempt Laws 109 and

132 brings us to the question of whether the challenged statutes

violate the dormant Foreign Commerce Clause.                  In our federal

system, Congress is imbued with the sole power "[t]o regulate

Commerce    with    foreign   Nations,    and   among   the   several   States

. . . ."    U.S. Const. art. I, § 8, cl. 3.         There are two sides to

the Commerce Clause coin:       the Clause not only gives Congress the

express power to regulate commerce but also implicitly protects

against state laws inimical to foreign or national trade. Barclays

Bank PLC v. Franchise Tax Bd. of Cal., 512 U.S. 298, 310-11 (1994).

     5
      We need not address the suggestion that Laws 109 and 132
undermine the BAA's exemption for certain purchases made pursuant
to reciprocal defense procurement agreements.      See 41 U.S.C.
§ 8304. This exemption applies only to military procurements and
is unaffected by the challenged Puerto Rico statutes.

                                    -28-
In other words, "[a]lthough   the Commerce Clause is by its text an

affirmative grant of power to Congress to regulate interstate and

foreign commerce, the Clause has long been recognized as a self-

executing limitation on the power of the States to enact laws

imposing substantial burdens on such commerce."        S.-Cent. Timber

Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984).

          In the case at bar, Antilles insists that Laws 109 and

132   impermissibly    infringe    upon   Congress's    constitutional

prerogative to regulate trade with foreign nations and thus violate

the dormant aspect of the Foreign Commerce Clause.       This argument

is difficult to unpack because the Supreme Court has had few

occasions to offer guidance regarding the contours of the dormant

Foreign Commerce Clause.   See Antilles II, 408 F.3d at 46.    Each of

these few instances involved the inapposite issue of state taxation

of foreign commerce.   See id. (collecting cases).      Even so, there

are principles that can be gleaned from cases discussing a closely

related concept:   the dormant Interstate Commerce Clause.     See id.

("Although the language of dormant Commerce Clause jurisprudence

most often concerns interstate commerce, essentially the same

doctrine applies to international commerce.").

          To begin, those cases make it clear that Puerto Rico is

subject to the strictures of the dormant Commerce Clause in regard

to both interstate and foreign commerce.         See Trailer Marine

Transp. Corp. v. Rivera Vazquez, 977 F.2d 1, 6-9 (1st Cir. 1992).

Like a state, therefore, Puerto Rico generally may not enact

                                  -29-
policies that discriminate against out-of-state commerce.              See,

e.g., Dep't of Revenue of Ky. v. Davis, 553 U.S. 328, 338 (2008).

But like any state, Puerto Rico is unchained from the shackles of

the Commerce Clause when it acts as a participant in the free

market as opposed to a sovereign regulating the market.           See White

v. Mass. Council of Constr. Emp'rs, Inc., 460 U.S. 204, 208 (1983)

(holding that "when a state or local government enters the market

as a participant it is not subject to the restraints of the

Commerce Clause"); Reeves, Inc. v. Stake, 447 U.S. 429, 437 (1980)

(finding "no indication of a constitutional plan to limit the

ability of the States themselves to operate freely in the free

market").     For example, when a state sells cement from a factory

that it owns, it is free to sell exclusively to in-state customers.

See Reeves, 447 U.S. at 440.         Similarly, a state acting as a buyer

in a particular market may discriminate in favor of in-state

sellers.    See Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 808-

09 (1976).        Conversely, when a state is acting as a regulator

rather     than    as   a   market   participant,   it   cannot   institute

discriminatory policies.         See, e.g., New Energy Co. of Ind. v.

Limbach, 486 U.S. 269, 277-78 (1988).

            It cannot be gainsaid that Laws 109 and 132 discriminate

against products that are produced outside Puerto Rico.                 The

constitutionality of these laws therefore turns on whether Puerto

Rico acts as a market participant or a market regulator when it

enforces them.

                                      -30-
            Before we proceed further, we must add a coda.                 To date,

the market participant exception has been recognized by the Supreme

Court only in cases implicating the dormant Interstate Commerce

Clause.     The Court has not said one way or the other whether the

exception applies in cases — like this one — in which a state law

is challenged under the Foreign Commerce Clause.                See Reeves, 447

U.S. at 437 n.9.      There is some reason to believe that the market

participant exception might be inapplicable to state laws that

discriminate against foreign commerce.                The need for national

uniformity in foreign affairs is important, see Wardair Can., Inc.

v. Fla. Dep't of Revenue, 477 U.S. 1, 8 (1986), and therefore state

laws that burden foreign trade necessarily deserve closer scrutiny

than those that burden only interstate commerce, see Barclays, 512

U.S. at 311.      Put another way, the dormant Foreign Commerce Clause

places     stricter   constraints     on     states    than    its    interstate

counterpart.      See Japan Line, Ltd. v. Cnty. of L.A., 441 U.S. 434,

448 (1979) ("Although the [Commerce Clause] grants Congress power

to regulate commerce 'with foreign Nations' and 'among the several

States' in parallel phrases, there is evidence that the Founders

intended    the   scope   of   the   foreign   commerce       power   to    be   the

greater.").

            The issue of whether the market participant exception can

save state laws that discriminate against foreign commerce is one

of first impression for this court.              See Nat'l Foreign Trade

Council v. Natsios, 181 F.3d 38, 65-66 (1st Cir. 1999) (leaving

                                      -31-
question open), aff'd on other grounds sub nom. Crosby v. Nat'l

Foreign    Trade   Council,      530   U.S.   363    (2000).      After    careful

consideration, we hold that a state may discriminate against

foreign commerce when it participates in the free market.                   Accord

Trojan Techs., Inc. v. Pennsylvania, 916 F.2d 903, 910-12 (3d Cir.

1990); K.S.B. Technical Sales Corp. v. N. Jersey Dist. Water Supply

Comm'n of N.J., 381 A.2d 774, 787 (N.J. 1977).

            Our conclusion is justified by the Supreme Court's oft-

repeated mantra that a state, when acting as a market participant,

is   not   "subject   to   the    limitations of       the    negative    Commerce

Clause."    Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520

U.S. 564, 592 (1997).            Even though the Court once expressly

reserved judgment on whether this principle applies to the negative

Foreign Commerce Clause, see Reeves, 447 U.S. at 437 n.9 (dictum),

it   has   not   otherwise    suggested       that   the     market   participant

exception is limited to interstate commerce.               To the contrary, the

Court has frequently employed sweeping language to the effect that

the Commerce Clause in its entirety does not apply to market

participants.      See, e.g., Camps Newfound, 520 U.S. at 592-93; New

Energy, 486 U.S. at 277; S.-Cent. Timber, 467 U.S. at 94; White,

460 U.S. at 208, 210; Alexandria Scrap, 426 U.S. at 810.

            Furthermore, extending the market participant exception

to the context of foreign commerce is consistent with the purposes

undergirding the exemption.             As the Court has explained, the

exception recognizes that a state that delves into the free market

                                       -32-
is akin to a private business — and the law has long respected the

unfettered discretion of private businesses to deal with whomever

they please.         See Reeves, 447 U.S. at 438-39; see also S.-Cent.

Timber, 467 U.S. at 94 (concluding that "the Commerce Clause places

no limitations on a State's refusal to deal with particular parties

when it is participating in the interstate market in goods"). This

makes perfect sense.        After all, a state that participates in the

market is burdened by the same regulations as private companies.

Reeves, 447 U.S. at 439.        To ensure a level playing field, "when

acting as proprietors, States should similarly share existing

freedoms from federal constraints, including the inherent limits of

the Commerce Clause."          Id.     While these principles have been

developed in the interstate commerce context, they apply with equal

force    when    a    state-proprietor    discriminates   against   foreign

commerce.     Private businesses are permitted to refuse to deal with

foreign companies, and so states, acting as market participants,

deserve the same leeway.

              A contrary rule would lead to anomalous results. Indeed,

any     law   that     discriminates     against   out-of-state   companies

necessarily impedes both interstate and foreign commerce.              The

Supreme Court has repeatedly relied on the market participant

doctrine to uphold discriminatory laws against Commerce Clause

challenges with respect to interstate commerce.             If the market

participant exception cannot also excuse barriers to foreign trade,

however, then all of these laws would be suspect and the Supreme

                                       -33-
Court's forging of the market participant doctrine would have been

little more than an exercise in futility.

            At bottom, we can see no reason why a state participating

in the market should not be permitted to choose with whom it does

business.    The dormant Foreign Commerce Clause exists to ensure

that the United States speaks with a unified voice when it engages

in foreign trade.    Wardair, 477 U.S. at 8; Japan Line, 441 U.S. at

448-51.   A particular state's refusal, as a market participant, to

transact business with a foreign company does not undermine the

cohesiveness of our national trade policy; it merely removes one

entry from the foreign company's customer list. Indeed, given that

the   federal   government    has   adopted   a    protectionist     posture

regarding its own public procurements, it can even be argued that

a state Buy American statute — such as Law 109 — actually fosters

more uniformity in our trade policy.

            Some commentators have expressed concern that foreign

countries   will   view   a   state-proprietor's    decision   not    to    do

business with them as a trade barrier erected by the United States

and will seek to retaliate against the nation as whole.                    See

Natsios, 181 F.3d at 66.         But this fear makes sense only when

discussing state regulations that burden trade between foreign

companies and private entities within that state.           If such laws

were permitted, foreign countries would face a confusing array of

protectionist state regulations and, as a result, might either

eschew trade with the United States or erect their own barriers to

                                    -34-
American products. But when a state-proprietor chooses to transact

business with only domestic entities, foreign companies face "no

problems of reconciling conflicting policy among multiple national

sovereigns."    Trojan Techs., 916 F.2d at 912.                 The companies can

still do business anywhere in the United States under the same

terms; they simply cannot contract with the government of the state

that enacted the protectionist statute.

           To sum up, we hold that a state cannot violate the

dormant    Foreign       Commerce   Clause     when       acting   as    a    market

participant.    This holding applies equally to Puerto Rico.

           But this conclusion does not end our odyssey.                          The

question remains whether Puerto Rico acts as a market participant

or a market regulator when enforcing Laws 109 and 132.

           In order to qualify for the prophylaxis of the market

participant doctrine, a state must be acting as a private company

would act, not "in its distinctive governmental capacity."                        New

Energy Co., 486 U.S. at 277.         Conversely, when a state flexes its

sovereign muscle to regulate the behavior of other players in the

market, the market participant exception does not apply.                          See,

e.g., id. at 277-78.

           We      add,    moreover,       that     a     state-proprietor        may

discriminate against foreign commerce only within the narrow market

realm in which it operates.         See S.-Cent. Timber, 467 U.S. at 99

(holding    that     a     state    "may      not       avail   itself       of   the

                                       -35-
market-participant doctrine to immunize its downstream regulation

of [a] market in which it is not a participant").

           We turn from the general to the specific. Law 109 states

(with exceptions not relevant here) that when the Commonwealth

either uses public funds to hire a contractor or engages in

construction work itself, the materials used in the construction

must originate from Puerto Rico.           See P.R. Laws Ann. tit. 3,

§§ 927a-927c.      These provisions do not implicate the Commerce

Clause.    When the Commonwealth uses its own funds to undertake a

construction project, it is acting as a buyer in the market for

construction services.       Cf. Alexandria Scrap, 426 U.S. at 808-10

(holding that state acting as a buyer of scrap metal is a market

participant). Because it is a market participant, the Commonwealth

is entitled (as any private company would be) to demand contractual

conditions that relate directly to the service being purchased.

See S.-Cent. Timber, 467 U.S. at 97 (explaining that "market-

participant doctrine permits a State to influence 'a discrete,

identifiable class of economic activity in which [it] is a major

participant'" (quoting White, 460 U.S. at 211 n. 7 (1983))).

           This case is unlike South-Central Timber, where the

Supreme    Court   prevented     Alaska     from    imposing      downstream

restrictions on its customers.            Under the invalidated Alaska

statute,   customers   who   gathered     timber   from   state   land   were

required to process that timber in Alaska.           The Court held that

Alaska had no business telling its customers what they could do

                                   -36-
with their timber after their transactions with the state were

completed.     Id. at 96-99.        The market participant doctrine was

inapplicable    because   Alaska,       by     regulating    behavior    that   was

unrelated to its timber sales transactions, acted more like a

sovereign than a private company.                 See id. at 99.         Here, by

contrast,    Puerto    Rico       has    legislated       domestic      preference

requirements    that   are    directly       tied    to   its    activities    as   a

participant in the market for construction services.                     When the

Commonwealth    acts   as     a    run-of-the-mill          buyer,    the     market

participant doctrine allows it to demand discriminatory concessions

that are proximately related to the transactions at issue.

            It is important to note that the parties do not challenge

the district court's finding that Law 109 has no bearing on private

construction projects that are subsidized by the Commonwealth.                      If

the Commonwealth had been enforcing Law 109 against such private

projects, then arguably it would be acting as a market regulator,

and the outcome of this appeal might be different.

            We are unconvinced by Antilles's attempts to characterize

Law 109 as a market regulation.                It first points to the law's

enforcement mechanism, which provides the Commonwealth with greater

recourse against a contractor who violates Law 109 than a private

party would have against a breaching counterparty under general

law.   See P.R. Laws Ann. tit. 3, §§ 927f-927g.                 By including these

"punitive" measures, Antilles says, the Commonwealth is regulating

its contractors as a sovereign would.               This line of reasoning goes

                                        -37-
nowhere   because     a   private      party    could    easily    insert   similar

enforcement mechanisms in a private construction contract.                         The

Commonwealth    has    merely     codified      in    legislation    the    sort    of

concessions that a private business could codify in an agreement,

and doing so does not divest Puerto Rico of market participant

status.

            Antilles next contends that Law 109 essentially regulates

the entire construction industry because it restrains the various

subcontractors who work on large government projects.                   We are not

prepared to take such a leap.              Law 109 regulates subcontractors

only to the extent that they are providing a service to the

Commonwealth.         And,   as     we     have      already   established,        the

Commonwealth is permitted to place protectionist demands on its

service   providers       when    it     participates     as   a    buyer   in     the

marketplace.

            That ends this aspect of the matter.                  We conclude that

Law 109 is shielded from Commerce Clause scrutiny by the market

participant doctrine.

            This leaves only Law 132, which requires companies that

sell cement in Puerto Rico to place certain labels on their

products.    See P.R. Laws Ann. tit. 10, § 167e.               That law is quite

clearly an attempt to regulate the cement market.

            The Commonwealth does not participate in the cement

market.     Rather, it has by means of Law 132 imposed labeling

regulations that affect transactions between its citizens and

                                         -38-
private companies.     That is the essence of acting as a market

regulator.   See Pharm. Research & Mfrs. of Am. v. Concannon, 249

F.3d 66, 80 (1st Cir. 2001).

          Where, as here, the market participant exception does not

apply and where Congress has not spoken otherwise, state laws that

on their face discriminate against foreign commerce are almost

always invalid.   See Fulton Corp. v. Faulkner, 516 U.S. 325, 331

(1996).   Law 132 is such a law:    it requires companies that sell

foreign cement to place a different label on their products than

companies that sell domestic cement.     See P.R. Laws Ann. tit. 10,

§   167e(a)(4).      The   record   adequately   evinces   that   this

discriminatory labeling requirement has placed the sellers of

foreign cement at a competitive disadvantage.       Law 132 can thus

survive only if the Commonwealth can show that the law advances a

legitimate local goal that could not have been served as well by

nondiscriminatory means.    See Maine v. Taylor, 477 U.S. 131, 138

(1986).

          The Commonwealth has not made such a showing here.       The

purported justification for Law 132 - insuring that contractors

comply with the BAA and Law 109 - can easily be accomplished by

less discriminatory means.     For example, the Commonwealth could

maintain a database of companies that sell qualified cement and

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share that information with contractors who work on projects

covered by the BAA and Law 109.6

            We hold, therefore, that, to the extent that Law 132

discriminates against sellers of foreign cement, it contravenes the

Foreign Commerce Clause.         Withal, we leave intact the labeling

requirements of Law 132 that apply evenhandedly to sellers of

foreign and domestic cement.          See Ayotte v. Planned Parenthood of

N. New Eng., 546 U.S. 320, 328-29 (2006) ("We prefer . . . to sever

[a statute's] problematic portions while leaving the remainder

intact.").

IV.   CONCLUSION

            To recapitulate, we uphold Law 109 as a permissible

action    taken    by   Puerto   Rico    in    its   capacity    as   a   market

participant, but we strike down those provisions of Law 132 that

discriminate      against   sellers     of    foreign   cement   (leaving    the

remainder of that law intact).

Affirmed in part, reversed in part.            All parties shall bear their

own costs.

      6
      Indeed, it appears that the Commonwealth already maintains
precisely this type of database.    See P.R. Laws Ann. tit. 3,
§ 927d.

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