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A Brief History of FTA’s “Buy America” Requirements

In 1933, as part of the government’s response to the Great Depression, Congress enacted the Buy American Act (the 1933 Act). The 1933 Act provides that: (1) only articles, materials, and supplies mined, produced or manufactured in the United States can be used for public projects; and (2) all contractors for public construction projects in the United States must use only domestic materials. The 1933 Act applies only to direct purchases of goods by federal agencies, not to grants made by federal agencies or to purchases by state and local governments with federal funds. The purpose of the 1933 Act was to require the federal government to spend taxpayers’ dollars only on goods produced in the United States, thereby fostering and protecting American industry and workers.

In 1964, as the number of publicly operated transit systems grew, Congress created the Urban Mass Transportation Administration (UMTA), to provide federal assistance for the purchase of public transit equipment. Because UMTA provides such assistance in the form of grants to state and local authorities, the provisions of the 1933 Act were not applicable. Congress finally included a Buy America provision applicable to UMTA programs in the Surface Transportation Assistance Act of 1978 (1978 STAA). Echoing the intent of the 1933 Act, the House Report stated that the provision was added:

to protect American manufacturers and suppliers who have suffered substantial losses as a result of competition from foreign imports, which, in many cases, are underpriced because of governmental financial support and cheap labor costs. The loss of business by domestic companies adds to the trade deficit, fuels inflation and leads to unemployment and reduced productivity.

The Buy America provision established a preference for products produced, mined, or manufactured in the United States. The provision applied only to contracts of UMTA grantees exceeding $500,000, and was subject to other exceptions as well. UMTA issued its initial set of regulations implementing the Buy America provision in December 1978.

The Surface Transportation Assistance Act of 1982 (1982 STAA) strengthened UMTA’s Buy America provision by prohibiting the obligation of UMTA-administered grant funds unless steel, cement (later deleted), and manufactured products used in the grant projects were produced in the United States. The 1982 STAA also eliminated the $500,000 threshold and permitted states to adopt more stringent Buy America requirements. The exceptions to the requirements were also revised, essentially creating a separate Buy America program applicable only to rolling stock, e.g., buses, rail cars, etc. First, the 1982 STAA required that American-made components represent at least 50% of the total cost of the rolling stock, with final assembly occurring in the United States. Also, the exception under the 1978 STAA that applied when domestic material increased the project cost by more than 10% was retained for rolling stock, but increased to 25% for all other projects. Other exceptions were retained that allow the Secretary of Transportation to waive the Buy America requirements upon determining that their application would not be in the public interest or that domestic supplies were not reasonably available in sufficient quantity and quality. In 1983, UMTA issued revised regulations consistent with the 1982 STAA.

The Surface Transportation and Uniform Relocation Assistance Act of 1987 (1987 STURAA) made additional significant changes to UMTA’s Buy America requirements for rolling stock. The 1987 STURAA required that more than 50% of the cost of a component’s subcomponents be of domestic origin for the component to be considered of domestic origin. In addition, the domestic content requirement was raised to 55% in 1989 and to 60% in 1991. Finally, the project cost differential for rolling stock was raised to 25%, the same as for other projects. UMTA did not adopt its final rule implementing the 1987 STURAA provisions until 1991. The final rule included appendices that listed major components of buses and rail rolling stock to assist in distinguishing between the terms “components” and “subcomponents” for purposes of determining Buy America compliance.

Changes to the Buy America provision have been relatively minor since the 1987 STURAA and its implementing regulations. The Intermodal Surface Transportation Act of 1991 (ISTEA), added iron to the covered products and changed UMTA’s name to the FTA. FTA’s implementing regulations added a definition of “component,” which is applicable to both manufactured products and rolling stock. FTA also clarified that a manufactured product is considered to have been produced in the United States only if its components are of domestic origin, i.e., they must be manufactured in the United States, regardless of the origin of their subcomponents. TEA-21, passed in 1998, made only minor changes.