Federal agency skirts infrastructure bill’s domestic content requirements

The steel industry accuses the U.S. Department of Housing and Urban Development of bypassing buy America provisions.gyn9038/iStock/Getty Images Plus

The U.S. Department of Housing and Urban Development (HUD) has upset a number of steel infrastructure component suppliers by allowing cities and states to buy iron and steel from foreign suppliers despite domestic content requirements in the infrastructure bill Congress passed last year.

The Infrastructure Investment and Jobs Act, signed into law by President Joe Biden on Nov. 15, 2021, included a Buy America Domestic Content Procurement Preference (BAP) for numerous federally funded grant programs, including those funded through HUD. The U.S. Department of Transportation grants also are covered, for example, and that department is also considering BAP waivers for its $100-million-a-year Strengthening Mobility and Revolutionizing Transportation (SMART) grants program.

But HUD’s Community Development Block Grant (CDBG) program is much bigger ($3.5 billion), and HUD’s decision to waive BAP requirements in a number of instances has proven very controversial. Both U.S. steel producers and steel product manufacturers are essentially livid.

On Nov. 15, Nucor wrote to HUD saying it “… encourages HUD to significantly narrow the scope of these proposed waivers, if not eliminate them altogether.” Nucor is a leading North American producer of bar, structural steel, plate, and sheet products.

The American Institute of Steel Construction, which represents the U.S. structural steel industry in the public policy arena, said HUD should “ensure that all iron and steel used in federal infrastructure projects are domestically produced.”

HUD declined to take that advice for CDBGs, which might be used for water and sewer improvements, street improvements, neighborhood facilities, and other community infrastructure. HUD estimates that 40% of CDBG funds awarded in 2021 ($1.4 billion of $3.5 billion total) were used on infrastructure projects where the BAP could apply. That $3.5 billion in turn was out of a total $15 billion of HUD grants in 2021, where infrastructure is an eligible activity that may be subject to the BAP.

HUD argues that it doesn’t have experience with domestic content requirements, so it wants to start slowly in implementing the infrastructure law’s domestic content requirements. It is, therefore, only applying that law’s domestic content provisions initially to its biggest grant program, the CDBG program, but with some notable exclusions:

• Infrastructure projects whose total cost is less than $250,000;
• All small grants of federal financial assistance below $250,000;
• Minor components of an infrastructure project, such that a cumulative total of no more than 5% of the total cost of the iron, steel, manufactured products, and construction materials used in and incorporated into infrastructure project, up to a maximum of $1 million.

The Municipal Castings Association (MCA) also opposed these waivers arguing HUD “offers no analysis to justify these proposed waivers.” In the case of the minor components waiver, the MCA argued it departs from Environmental Protection Agency and the U.S. Department of Agriculture small component waivers in two important respects:

1. It fails to retain the limitation on individual item value (may not exceed 1%).
2. It gives no contemplation to the documentation obligations of contractors and project sponsors relative to the foreign items permissively incorporated into a project under the authority of the de minimis waiver.

Nucor also opposed the $1 million small components ceiling, arguing it was much higher than domestic content exclusions offered by the Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA). The FHWA exclusion applies to the cost of materials, as long as it does not exceed one-tenth of 1% of the total contract cost or $2,500, whichever is greater. The FTA provides for a small purchase waiver of the buy America requirements for purchases of $150,000 or less.

“If implemented, this higher threshold could result in waiver of the buy America requirements for a number of steel products with important industrial and national security uses, including steel fasteners,” Nucor wrote.