[Federal Register Volume 89, Number 83 (Monday, April 29, 2024)]
[Notices]
[Pages 33440-33443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09052]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

[Docket No.: OST-2023-0111]


Waiver of Buy America Requirements for the Pacific Island 
Territories and the Freely Associated States

ACTION: Notice.

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SUMMARY: The Department of Transportation (DOT) seeks to maximize the 
use of American-made products and materials in all federally funded 
projects as part of the Biden-Harris Administration's implementation of 
the historic Bipartisan Infrastructure Law (BIL). In this notice, DOT 
is taking action to finalize a temporary general applicability waiver 
of the requirements of section 70914(a) of the Build America, Buy 
America Act (BABA), included in BIL, and related domestic preference 
statutes administered by DOT and its Operating Administrations (OAs) 
for federal financial assistance awarded by DOT and its OAs for 
infrastructure projects located in the Commonwealth of Northern Mariana 
Islands (CNMI), Guam, and American Samoa, collectively referred to as 
the ``Pacific Island territories.'' The waiver also applies to 
discretionary grant assistance provided by DOT and its OAs to the 
Freely Associated States (the Republic of Palau, Republic of the 
Marshall Islands, and Federated States of Micronesia) in the Pacific 
that are subject to a domestic preference statute. As it applies to the 
Freely Associated States, the waiver does not include BABA, which only 
applies to infrastructure projects in the United

[[Page 33441]]

States and its territories. The waiver will provide time for DOT to 
collect and analyze evidence to determine if a more targeted waiver of 
these requirements is in the public interest. The waiver allows time 
for DOT and its OAs to offer technical assistance to potential 
assistance recipients in the remote communities in the Pacific Island 
territories and Freely Associated States. The waiver will be reviewed 
prior to its expiration.

DATES: The waiver is applicable to awards that are obligated on or 
after April 29, 2024 until March 1, 2025.

FOR FURTHER INFORMATION CONTACT: For questions about this notice, 
please contact Elizabeth Fox, DOT Office of the Assistant Secretary for 
Transportation Policy, at [email protected] or at 202-981-2838. For 
legal questions, please contact Jennifer Kirby-McLemore, DOT Office of 
the General Counsel, 405-446-6883, or via email at 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Buy America preferences set forth in section 70914(a) of BABA 
included in BIL require that all iron, steel, manufactured products, 
and construction materials used for infrastructure projects in the 
United States under federal financial assistance awards be produced in 
the United States.
    Under section 70914(b) and in accordance with the Office of 
Management and Budget (OMB)'s Memorandum M-24-02, Implementation 
Guidance on Application of Buy America Preference in Federal Financial 
Assistance Programs for Infrastructure, DOT may waive the BABA 
application in any case in which it finds that: (i) applying the 
domestic content procurement preference would be inconsistent with the 
public interest; (ii) types of iron, steel, manufactured products, or 
construction materials are not produced in the U.S. in sufficient and 
reasonably available quantities or of a satisfactory quality; or (iii) 
the inclusion of iron, steel, manufactured products, or construction 
materials produced in the U.S. will increase the cost of the overall 
project by more than 25 percent. All waivers must have a written 
explanation for the proposed determination; provide a period of not 
less than fifteen (15) calendar days for public comment on the proposed 
waiver; and submit the proposed waiver to the OMB Made in America 
Office (MIAO) for review to determine if the waiver is consistent with 
policy.
    BABA also provides that the preferences under section 70914 apply 
only to the extent that a domestic content procurement preference as 
described in section 70914 does not already apply to iron, steel, 
manufactured products, and construction materials. BIL Sec.  70917(a)-
(b). Federal financial assistance programs administered by DOT's 
Operating Administrations (OAs) \1\ are subject to a variety of mode-
specific statutes that apply specific Buy America \2\ requirements to 
iron, steel, and manufactured products, including 49 U.S.C. 50101 
(FAA); 23 U.S.C. 313 (FHWA); 49 U.S.C. 5323(j) (FTA); and 46 U.S.C. 
54101(d)(2) (MARAD). Recent annual appropriations acts have also 
required DOT to apply the Buy American Act (41 U.S.C. chapter 83) to 
funds appropriated under those acts,\3\ where a mode-specific statute 
is not in place. These statutes also allow for waivers of the Buy 
America requirements to be issued when the DOT determines that doing so 
is in the public interest.
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    \1\ DOT OAs that provide or administer financial assistance 
covered under this proposed waiver include the Federal Aviation 
Administration (FAA); Federal Highway Administration (FHWA); Federal 
Transit Administration (FTA); and the Maritime Administration 
(MARAD).
    \2\ In this notice, references to ``Buy America'' include 
domestic preference laws called ``Buy American'' that apply to DOT 
financial assistance programs.
    \3\ For example, section 409 of the Transportation, Housing and 
Urban Development, and Related Agencies Appropriations Act, 2022 
states that ``no funds appropriated pursuant to this Act may be 
expended by an entity unless the entity agrees that in expending the 
assistance the entity will comply with sections 2 through 4 of the 
Act of March 3, 1933 (41 U.S.C. 8301-8305, popularly known as the 
``Buy American Act'').''
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    DOT and its OAs provide financial assistance to the three Pacific 
Island territories of Guam, American Samoa, and CNMI through both 
discretionary grants and allocated programs, including assistance 
programs for highways and bridges, public transportation, airports, and 
port facilities. The Freely Associated States (the Republic of Palau, 
Republic of the Marshall Islands, and Federated States of Micronesia) 
in the Pacific region are also eligible recipients of discretionary 
grants under FAA's Airport Improvement Program (AIP).
    Over five years from FY 2018 to FY 2022, DOT OAs provided over $340 
million in financial assistance for 160 capital projects in the Pacific 
Island territories under various programs where infrastructure is an 
eligible activity and may be subject to BABA or other DOT existing Buy 
America requirements. FAA also provided $88 million in AIP 
discretionary grants to the Freely Associated States in the Pacific 
region for 20 projects over that same time period.
    Economies in the Pacific Islands are over 5,000 miles from the 
mainland United States and must import products via air or sea. These 
economies have few local heavy manufacturers and rely largely on 
established regional supply chains from east Asia, Australia, and New 
Zealand. Most goods, equipment, materials, and supplies are imported 
and rely on shipping with associated timelines and unpredictable 
shipping fuel costs fluctuations. Moreover, materials sourced from the 
United States lead to additional shipping fees and longer lead times, 
thus significantly extending construction activity schedules. Lastly, 
ongoing gaps in supply chain availability impact lead times for 
materials, increasing project timelines. For these reasons, DOT is 
concerned that complying with Buy America requirements may increase 
already elevated project time and costs--particularly in the short 
run--and seeks time to better understand the local manufacturing 
footprint and the balance of equities for residents of the Pacific 
Island territories. DOT is aware that substantial changes to shipping 
and supply chains to incorporate domestic sourcing requirements in the 
Pacific Island territories could take multiple years to establish.
    In considering this waiver, DOT consulted with the relevant Federal 
assistance programs in the respective OAs, including the regional 
offices in those agencies that directly administer DOT funding programs 
in the Pacific Island territories and Freely Associated States. DOT 
also relied on other communications that it has received from 
stakeholders in those territories. For example, CNMI and Guam have 
cited their isolated location in the Western Pacific and reliance on 
ocean freight as the only mode of transporting commodities to the 
island as creating significant challenges in obtaining materials from 
domestic sources, with impacts on both project costs and delivery 
schedules. The two territories have also indicated that shipping 
construction materials from the continental United States raises 
shipping costs by approximately 30 percent above the cost to ship 
directly to the islands from Asia.
    Other Federal agencies have also conducted outreach efforts to the 
Pacific Island territories and received similar feedback. For example, 
representatives from American Samoa have indicated to the Federal 
Emergency Management Agency that ``As a containerized

[[Page 33442]]

community, our territories depend on goods, equipment, materials, and 
supplies to be imported.'' They further stated that ``we can purchase 
equipment from foreign countries closer to American Samoa and with 
reasonable prices and shorter shipping time.'' American Samoa 
representatives also noted that availability of materials from nearby 
foreign countries such as New Zealand and Australia would result in a 
significant cost savings to the grantors.

Issuance of the Proposed Waiver and Discussion of Comments Received

    On August 9, 2023, DOT published a proposed Buy America waiver for 
projects located within the Pacific Island territories of CNMI, Guam, 
or American Samoa and funded under DOT-administered financial 
assistance programs in the Federal Register 88 FR 53949. DOT received 
five comments on the proposed waiver. Three of the comments were 
supportive of the waiver, while two opposed the waiver.
    The opposing commenters noted that there are existing opportunities 
to purchase both US made equipment and steel in the Pacific Island 
territories. One commenter noted they have supplied BABA compliant 
equipment to Guam in the recent past. The other commenter noted that 
the domestic steel industry has capacity to support infrastructure in 
the Pacific Island territories.
    The supportive commenters noted that higher costs and longer lead 
times are barriers to Buy America compliance in the Pacific Island 
territories. Additionally, higher cost estimates were cited as a reason 
for grant applications being less competitive with other states. 
Similarly, one commenter noted they have experienced considerable risk 
and uncertainty when bidding due to the limited time manufacturers and 
suppliers can hold steel pricing quotes and noted that in the recent 
past several projects have gone through the Invitation for Bid 
procurement process and received proposals that greatly exceed the 
grant funding allocation. The commenters also noted the impacts of 
fluctuating shipping costs add to the overall cost and uncertainty 
around procurement.
    DOT acknowledges that there are current opportunities for purchase 
of Buy America compliant products in the territories; however, DOT also 
recognizes that the purchase of those compliant products may result in 
substantially higher costs and require longer lead times to procure, 
leading to impacts on both project competitiveness and project 
delivery. Moreover, the stated intent of the waiver is to provide time 
for DOT to collect and analyze evidence to determine if a more targeted 
waiver of these requirements is in the public interest and allow time 
for DOT and its OAs to offer technical assistance to potential 
assistance recipients in the remote communities in the Pacific Island 
territories and Freely Associated States. Thus, during this temporary 
general applicability waiver period, DOT will come to better understand 
the local manufacturing footprint, consider how to best balance the 
equities for residents of the Pacific Island territories, and work with 
other federal agencies on ways to help ease supply chain challenges for 
domestic sources in those territories.
    One commenter also noted that the region's strategic locations 
should be guarded against technology that could be detrimental to their 
security. Another commenter also recognized the strategic importance of 
their location, but noted that a waiver is necessary to allow purchases 
even from countries who are in strategic defense alliances with the 
United States. DOT recognizes the importance of security considerations 
for port equipment purchases, particularly for ship to shore cranes, 
and the recently announced Biden-Harris Administration effort to 
bolster port security.\4\ The Department also recognizes that the 
issues extend to U.S. ports more broadly, beyond those in the Pacific 
Island territories. As a result, DOT has chosen to exempt ship to shore 
cranes from the waiver and will address domestic supply issues for 
these critical assets through separate actions. DOT will exercise 
additional oversight for assistance agreements involving ports during 
the period the waiver is active.
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    \4\ https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/21/fact-sheet-biden-harris-administration-announces-initiative-to-bolster-cybersecurity-of-u-s-ports/.
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    One opposing commenter noted that the waiver would be inconsistent 
with Congressional intent and Administration policy because it would 
not be maintaining and strengthening the existing DOT Buy America 
requirements. DOT believes that this waiver will help ensure that all 
Americans, including those in the Pacific Island Territories, are able 
to access the benefits provided by the once in a generation investment 
in infrastructure provided by BIL. Providing these short-term 
flexibilities to projects in that region will help alleviate systemic 
barriers to opportunities that have limited DOT's ability to deliver 
resources and benefits equitably to all in these territories. The 
waiver will allow DOT to work with other infrastructure agencies to 
ensure that the shipping and supply chains to the Pacific Island 
territories integrate domestic sourcing requirements in a feasible and 
equitable way over the longer term.
    One supporting commenter noted that they believe that the 
challenges they outlined in complying with Buy America requirements 
fully support a waiver for at least 18 months, potentially permanently. 
DOT believes that the time frame is appropriate and will reevaluate if 
a more targeted waiver is in the public interest as it gathers 
additional information.
    DOT-assisted infrastructure projects located within the Pacific 
Island territories and Freely Associated States are expected continue 
to experience challenges with product delivery, availability, 
reliability, and project scheduling without the waiver. Infrastructure 
project schedules rely on readily available products delivered within 
reasonable timeframes. Due to the extreme shipping distances required 
for products produced in mainland United States and due to the lack of 
existing local product supply networks for these products, 
manufacturers may not be able to assure on-time delivery of compliant 
products. As a consequence, associated projects in the Pacific Island 
territories and Freely Associated States may face unreasonable 
scheduling uncertainty. The waiver will help grant recipients establish 
rules and procedures to manage Buy America requirements. Furthermore, 
the waiver will provide recipients more options to efficiently complete 
projects.
    Uncertainties regarding capacity, shipping, and supply networks 
make domestic sourcing in the Pacific Island territories and Freely 
Associated States challenging for assistance recipients, shippers, and 
DOT staff in the short run. DOT is taking steps to understand 
opportunities to leverage existing shipping and transportation 
processes to make domestic sourcing more feasible over the longer term.

Finding on the Waiver

    Based on all the information available to the Agency, DOT finds 
that it is in the public interest to issue a temporary general 
applicability public interest waiver of the requirements of 70914(a) of 
the Build America, Buy America preferences for iron, steel, 
manufactured products, and construction materials used in 
infrastructure projects located within the Pacific Island territories 
of CNMI, Guam, or American Samoa and funded under DOT-administered 
financial assistance programs. The waiver applies to recipients located 
in

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CNMI, Guam or America Samoa of all DOT-administered financial 
assistance programs, including those subject to program-specific 
domestic preference requirements. The waiver applies to all awards 
obligated after the effective date and, in the case of awards obligated 
prior to the effective date, all expenditures for non-domestic iron, 
steel, manufactured products, and construction materials incurred after 
the effective date. However, this waiver does not apply to purchases of 
ship to shore cranes.
    DOT is issuing this temporary general applicability public interest 
waiver under the following authorities; 70914(b) of BIL, 23 U.S.C. 
313(b)(1), 49 U.S.C. 5323(j); 46 U.S.C. 54101(d)(2)(B)(i)(I), 49 U.S.C. 
50101(b)(1), and 41 U.S.C. chapter 83. Under those DOT authorities, the 
proposed waiver would also apply to projects in the Freely Associated 
States (the Republic of Palau, Republic of the Marshall Islands, and 
Federated States of Micronesia). As it applies to the Freely Associated 
States, the waiver does not include BABA, which only applies to 
infrastructure projects in the United States and its territories.
    The duration of the waiver is from the effective date April 29, 
2024 until March 1, 2025. The proposed waiver had a duration of 18 
months from the effective date of the final waiver. DOT is issuing the 
final waiver with a sunset date of March 1, 2025 to better align with 
the coordinated strategy for the issuance of this waiver type across 
the Federal government. DOT will review this waiver prior to its 
expiration to assess whether it remains necessary to the fulfillment of 
DOT's missions and goals and consistent with applicable legal 
authorities, such as BABA, Executive Order 14005, 2 CFR part 184, and 
OMB Memorandum M-24-02. DOT may, based on the results of that review, 
terminate the waiver, or take action to develop a new waiver in 
consultation with the MIAO.
    Section 117 of the SAFETEA-LU Technical Corrections Act of 2008 
(Pub. L. 110-244, 122 Stat. 1572) also requires an additional five-day 
comment period after FHWA publishes a waiver finding notice. Comments 
received during that period will be reviewed, but the finding will 
continue to remain valid. Those comments may influence DOT/FHWA's 
decision to terminate or modify a finding.

    Issued in Washington, DC.
Christopher Coes,
Acting Under Secretary for Policy.
[FR Doc. 2024-09052 Filed 4-26-24; 8:45 am]
BILLING CODE 4910-9X-P