On January 14, 2025, the Federal Highway Administration (FHWA) announced the end of its general waiver of Buy America requirements for manufactured products. The new FHWA rule aligns the FHWA requirements for manufactured products incorporated into federal highway projects with the domestic content standards of the Build America, Buy America Act (BABA).
Phased approach to implementing the manufactured products test
The final rule, which goes into effect on March 17, 2025, reverses FHWA’s 40-year-old policy waiving domestic content requirements for manufactured products. Under the new rule, FHWA will require manufactured products incorporated into federal highway projects to meet BABA’s two-pronged domestic content requirement to be considered “Buy America-compliant.” Per the BABA, manufactured products are considered compliant when they are both manufactured in the United States (“final assembly test”) and more than 55 percent of the manufactured product’s components, by cost, is mined, produced, or manufactured in the United States (“cost of components test”).
The new rule will be implemented in a phased manner. FHWA will enforce the final assembly test for all projects obligated on or after October 1, 2025. The cost of components test will become effective for projects starting October 1, 2026. This means that any project obligated after October 1, 2026, will have to comply with both the final assembly test and the cost of components test.
Important changes for iron and steel components of manufactured products
FHWA will be retaining its existing Buy America requirement for iron or steel products, which requires that all manufacturing processes, including application of a coating, occur in the United States.
The final rule also clarifies that this requirement will apply to iron and steel products even when they are components of precast concrete products, intelligent transport systems, or other electronic hardware systems. FHWA’s final rule considers these products Buy America-compliant only if they meet both the melt-to-coat test for iron and steel components and the two-pronged test for manufactured products. However, the cost of iron and steel components will be included for purposes of meeting the 55 percent cost-of-components test. This more stringent requirement will not apply to other manufactured products that contain predominantly iron and steel components.
The FHWA’s final rule is a significant change to the domestic content requirements for federal highway construction. Contractors are well advised to review the new requirement and take action to ensure that they meet it.