Buy America Act and Transit Projects
Other Key Information
Most transit projects (e.g. construction of subway systems, procurement of ferries, etc.) are funded by the Federal Transit Administration (FTA) with money from the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (known as SAFETEA-LU). This funding brings with it Buy America restrictions that require all iron, steel and manufactured products used in the project to be made in the U.S. All steel and iron manufacturing processes must take place in the U.S., except metallurgical processes involving refinement of steel additives. For manufactured products to be considered produced in the U.S., all manufacturing processes for the product must take place in the U.S., and all components must be of U.S. origin.
Companies pursuing transit procurements funded with federal money should familiarize themselves with provisions of FTA Circular 4220.1E Third Party Contracting Requirements and Title 49 Part 661 of the Code of Federal Regulations (CFR).
Additionally, Canada and the United States have recently signed a government procurement agreement that gives Canadian companies access to certain state level procurement.
Someone wants to use your service or product on a transportation project in the United States. It might mean a big contract, but would it result in good business? It can for firms that identify and address potential problems at the start. Here's why:
- These contracts generally include provisions that can disadvantage -- but do not necessarily eliminate participation by -- Canadian firms.
- Under U.S. law, American transit authorities and contractors that use Canadian foreign materials on federal-funded projects without proper waivers are liable for fraud.
- Business partners and contractors that suddenly discover difficulties in using Canadian products may equally suddenly decide to terminate their arrangements with Canadian suppliers.
Federal funding of transit projects
Over 80% of state and local transportation project receive funds from one or more U.S. federal departments or agencies. If the project authority receives ANY funding from U.S. Department of Transportation (DOT) agencies, the transit authority that receives the grant must:
- ensure that its contractors meet certain American content and manufacturing requirements; or
- get the FTA to agree to an exception to Buy America requirements.
How to find out:
- Call the U.S. government's FTA regional offices that manage these grants. They should be able to provide information on grants related to specific projects.
- Many Canadian firms participate as a subcontractor on such projects. Ask the prime contractor, other higher-tier subcontractors, or the immediate prospective buyer of the goods or services.
Beating Buy America
To meet Buy America requirements, rolling stock (this includes busses, subways, light rail, commuter rail, monorail, passenger ferryboats, trolleys, inclined railways, and people movers) requirements are:
- the cost of components produced in the U.S. must be more than 60% of the cost of all components (detailed rules on calculating the cost of a component as well as examples of components may be found in 49 CFR Subpart 661.11); and
- final assembly must occur in the U.S. In a "Dear Colleague" letter dated 18 March 1997, available on its website, the FTA defines "final assembly" of railcars and busses.
The FTA realizes that U.S. suppliers are not capable of fulfilling all manufacturing needs and will grant waivers to allow the use of foreign materials. Depending on the type of waiver sought, waivers must be requested by the grantee, the prime contractor, or suppliers and should be sought early in the bidding process. Waivers may be granted on one of the following grounds:
- use of U.S. materials would be inconsistent with the public interest; or
- materials are not produced in the U.S. in sufficient and reasonably available quantities of a satisfactory quality; or
- U.S. materials cost significantly more (i.e. 25%) than foreign products.
General waivers exist for some products, e.g. microprocessors and software.
Buy America doesn't always mean "complete prohibition." Sometimes it does, but other times, many Canadian firms overcome such, American content and manufacturing requirement restrictions and succeed in providing products and professional services on U.S. federal-funded public transportation projects.
Keys to Buy America success
Your nearest Canadian Trade Commissioner – In Canada or Abroad, can assist firms in planning to effectively:
- research provisions that apply;
- meet and review the situation with officials that administer rules;
- start early to research special procedures;
- identify and eliminate competitive stumbling blocks;
- gain American buyer support for the bid; and
- obtain political support from the state or local government.
Types of contracts for Canadian firms
In federally-funded prime contracts under US$100,000 no Buy America provisions apply – Canadian goods and services may be provided without any special waivers. If a state or local government wants to include state or local preferences in a transit contract, it's not eligible for federal funds.
In rolling stock procurements (e.g. rail cars, busses, vans, ferries, other vehicles) grant recipients must certify whether or not their project meets Buy America requirements, as noted in regulations 49 CFR Subpart 661.12. According to regulations, either condition "a" or condition "b" must be certified:
- The cost of components produced in the U.S. must be more than 60% of the cost of all components; and final assembly is done in the United States.
- The grant recipient (and contractors and subcontractors involved in the grantee's project) must provide a certificate of compliance or the ultimate buyer (usually the transit authority) obtains a waiver of the Buy America requirement to permit inclusion of specified Canadian products.
Buy America waivers
BAA waiver requests are fairly common in rolling stock procurements. The FTA's Washington, D.C. office, can advise grant recipients on foreign content issues.
To request a waiver, the grant recipient, contractor and subcontractor involved must:
- provide a certificate of non-compliance to the FTA stating that their bids will not comply with Buy America requirements, in which they list the items for which waivers will be sought, and then,
- apply for those waivers from the FTA.
The Administrator of the FTA may waive Buy America provisions at the request of the grant recipient based on:
- public interest: the use of American goods would be contrary to the public interest of the United States [49 C.F.R. Subpart 661.7 (b)];
- non-availability: the materials for which the waiver is requested are not available in sufficient quantity and reasonable quality [49 C.F.R. Subpart 661.7 (b)]; or
- price: inclusion of American goods would increase the cost of the contract between the grantee and the supplier of that item by more than 25% [49 C.F.R. Subpart 661.7 (d)].
Work in which Canadian participation may be difficult
Federally-funded transit-related projects other than rolling stock (e.g. bus shelters, subway station elevators). These projects require both:
- 100% U.S.-origin content; and
- all manufacturing must be done in the United States.
The conditions for waivers are the same as for rolling stock, but are much less commonly granted (detailed rules: 49 CFR Part 661).
The rolling stock calculation
In response to many questions involving the "60%" calculation, the FTA issued a "Dear Colleague" letter on 30 March 2001 to address the issue. A simple calculation to illustrate the point follows:
Assume that the aggregate cost of all components of a bus is $100. In order to comply with Buy America, more than $60 worth of the components must be of domestic origin. To determine which components count as domestic, the origin of the components must be reviewed. If a component has a cost of $10 and more than $6 worth of its subcomponents are manufactured in the US, then the entire $10 cost of the component is considered domestic and counts toward the required domestic content of more than $60.
The Buy America analysis begins with the identification of the end product being procured. From that determination flows the discussion of which items are components and which are subcomponents and whether the procurement is governed by the general requirements found at 49 CFR Subpart 661.5 or the rolling stock requirements found at 49 CFR Subpart 661.11. An end product is "any item that is to be acquired by a grantee as specified in the overall project contract." 49 CFR Subpart 661.11(s). If a grantee is procuring a new rail car, the car is the end product and the traction motor would be a component of the end product. If that same grantee procures a replacement traction motor for an existing rail car, then the traction motor would be the end product for purposes of Buy America analysis.
Issues specific to Amtrak
The National Railroad Passenger Corporation (Amtrak) is a passenger railroad, owned by the United States government through the U.S. Department of Transportation (DOT). Amtrak was incorporated in 1971 pursuant to the Rail Passenger Service Act of 1970 and is authorized to operate a nationwide system of passenger rail transportation.
As a recipient of federal assistance, Amtrak is required to conduct contracting and procurement activities involving FTA funds in conformance with the fundamental principles of competitive procurement which requires full and open competition, as stated in the Office of Management and Budget Circular A-102, Grants and Cooperative Agreements with State and Local Governments, and its implementing common rule which is codified by the DOT in 49 CFR Part 18. This is a guiding principle in all federally funded procurements and is intended to ensure that a grantee obtains its minimum needs at a fair and reasonable price and that all responsible sources have an opportunity to compete.
Amtrak is a for-profit corporation and not a department, agency or instrumentality of the U.S. government. On contracts worth over US$1.0 million, Amtrak is legally obliged to purchase only :
- non-manufactured articles, material and supplies mined or produced in the U.S.; or
- manufactured articles, material, and supplies manufactured in the U.S. substantially from articles, material, and supplies mined, produced or manufactured in the U.S.
The Secretary of Transportation may exempt Amtrak from these requirements if:
- restrictions are inconsistent with the public interest; or
- restrictions cause the cost to be unreasonable; or
- U.S. materials are not sufficiently and reasonably available in commercial quantities of a satisfactory quality; or
- rolling stock or power train equipment cannot be bought and delivered to the U.S. within a reasonable time.
Amtrak entered into various agreements with states, cities and other local transportation authorities and private companies for railroad facility and infrastructure improvements and for the remanufacture and supply of railroad passenger equipment. Amtrak has a current commitment of approximately US$32.0 million for infrastructure improvements whose term extends through project completion.
Minority and disadvantaged business enterprise
The U.S. Federal government requires grant recipients to foster participation by American minority business enterprises and small disadvantaged business in funded projects.
Canadian firms legally do not qualify for business reserved under such programs. However, if a Canadian firm is pursuing a place on a project team, and the prime contractor proposes to give to a minority business enterprise all, or a portion of work that you propose to bid, as a Canadian firm you might consider:
- convincing the prime or the transit organization awarding the prime contract to give some OTHER portion of the contract to one of those firms, because your firm supplies the best value available for that product or service; and
- partnering with a U.S. business that does qualify for these preferences. You can do up to 49% of the work set aside for the small or minority business -- but remember you will still have to meet Buy America requirements for anything you supply under that subcontract.
For more information:
- Visit the Department of Transportation (DOT) Buy America webpage.
- If you are interested in furnishing products or services to the FTA itself, the FTA publicizes business opportunities at FedBizOpps.
- Visit the Buy America section of the FTA's website.
- For additional assistance, please contact your nearest Canadian Trade Commissioner – In Canada or Abroad, before you get involved in a contract.
- Date Modified: