BABA Background
The Build America Buy America (BABA) Act, embedded within the 2021 Infrastructure Investment and Jobs Act, Pub. L. 117–58 (Nov. 15, 2021, Div. G, §§ 70901-27), significantly enhanced the extent to which "Buy America" requirements apply to federally funded infrastructure. The BABA Act set new minimum requirements for domestic sourcing of iron and steel, manufactured products, and construction materials for all federally funded infrastructure projects.
The Office of Management and Budget (OMB) issued Memoranda M-22-11 (superseded) and M-24-02, in addition to implementing regulations at 2 C.F.R. Part 184, to provide important background definitions, baseline standards, and waiver guidance. Each funding agency, however, retains considerable authority to implement BABA requirements in its own way and manages its own waiver process in coordination with a centralized OMB-level Made in America Office (MIAO).
For several years, federally supported entities implementing federally funded infrastructure projects—including especially state and local government agencies—have been navigating the application of BABA requirements in addition to any preexisting agency- or program-specific domestic sourcing requirements. So too have the contractors, subcontractors, and suppliers performing the contracted construction work. Throughout the supply chain, compliance certifications have been issued, revised, and negotiated many times over as funders, buyers, and sellers continue to adjust to the ever-increasing complexity of domestic sourcing obligations.
FHWA Manufactured Products Waiver—Recission Phase One, October 1, 2025
A significant event in the enhanced domestic sourcing regime will occur on October 1, 2025.
Pursuant to 49 U.S.C § 313, projects funded by the Federal Highway Administration (FHWA) have long been subject to statutory Buy America requirements for "steel, iron, and manufactured products." However, since 1983, the portion of this requirement applicable to "manufactured products" has been subject to a broad waiver, making domestic sourcing of manufactured products for FHWA-funded projects a minor consideration, if not, in most cases, a nullity. See generally, 90 Fed. Reg. 2932, 2933-36 (Jan. 14, 2025) (Background and Regulatory History). Until BABA, domestic-sourcing requirements for FHWA projects were focused almost entirely on iron and steel. See generally id.
That started to change with BABA. A key feature of the BABA Act was to require reevaluation of preexisting waivers such as this one, discouraging their continuation. Accordingly, throughout 2023 and 2024, FHWA reassessed its manufactured products waiver. Via a final rule issued on January 14, 2025, FHWA revised 23 C.F.R. § 635.410 to harmonize historical FHWA Buy America definitions and standards with those implemented at 2 C.F.R. Part 184 for BABA, and prospectively rescind its long-standing manufactured products waiver. The rescission is to become effective in two phases.
Manufactured Products Waiver Recission Phase 1—October 1, 2025
For FHWA-funded projects for which FHWA funding is obligated (i.e., made available, by agreement, to state or local governments, special districts, or private entities), on or after October 1, 2025, all manufactured products incorporated into the project must be manufactured in the United States. 23 C.F.R. § 635.410(c)(1)(vii).
Consistent with 2 C.F.R. § 184.3, FHWA regulations at 23 C.F.R. § 635.410(c)(1)(iv) define "manufactured products" as "articles, materials, or supplies that have been processed into a specific form and shape, or combined with other articles, materials, or supplies to create a product with different properties than the individual [input] articles, materials, or supplies." The regulations further instruct that: "[i]f an item is classified as an iron or steel product, an excluded material, or other product category as specified by law or in 2 CFR part 184, then it is not a manufactured product." Id. Of particular note, an item will be an iron or steel product rather than a manufactured product if the cost of its iron or steel content is more than 50 percent of the item's entire cost of components. Id. § 635.410(c)(1)(vi).
Manufactured Product Waiver Recission Phase 2—October 1, 2026
For projects for which FHWA funds are obligated after October 1, 2026, manufactured products incorporated into FHWA-funded infrastructure projects will have to be manufactured in the United States and have to meet BABA's 55 percent cost of components test. Per FHWA's phased rescission, for projects funded from October 1, 2025, to September 30, 2026, the cost of components test will not apply.
Useful Public Resources
As entities participating in planning and completion of highway projects manage compliance with the new manufactured products domestic sourcing requirements, FHWA's general waiver for de minimis costs may warrant consideration, and project-specific waivers may be necessary. The regulations and federal register notices described above provide additional detail, as does FHWA's Post October 23, 2023 FHWA Q&A document, available on its website.
For questions regarding Buy America requirements in federally funded public infrastructure, please feel free to contact Scott S. Sheffler of Venable LLP's Government Contracts Practice.