Fabricators might get a win related to federal infrastructure projects

The metal used for federally funded highway projects might not have to be 100% sourced from domestic mills if a new Federal Highway Administration rule is formally adopted. Inna Borodiy/iStock/Getty Images Plus

Normally, when a federal agency announces the tightening of Made in America rules, metal fabricators can expect some bad news. That’s not the case, however, with a recent Federal Highway Administration (FHWA) proposal.

FHWA’s just-proposed rule alters its domestic content requirements for manufactured highway products built with federal dollars. This announcement is a result of authorization found in the infrastructure law passed two years ago.

The proposed changes reverse the department’s current policy that any iron and steel components of a manufactured product be 100% “melted and poured” in the U.S. when used in FHWA-funded projects. The proposed rule requires manufactured products be 55% made in the U.S. As far as iron and steel components, they will be just part of the cost of the entire manufactured product. So, for example, a bridge bearing, which would likely be considered a manufactured product in a federally funded infrastructure project, currently has to be fabricated with iron and steel produced in the U.S. That would not be the case if the proposed rule is implemented.

“This is a rollback of the domestic content standard for iron and steel in manufactured products and is bad for U.S. steel producers,” said one industry source.

But the proposed rule is good for fabricators of highway products containing iron and steel. If the proposal becomes final, these companies will be able to source iron and steel from overseas sources, which have typically been much less expensive than domestic sources in recent months.

After addressing iron and steel sourcing and manufactured products, FHWA has turned its attention to a third category, something that might be called hybrid products. These are manufactured products that contain perhaps substantial iron and steel. The two products in this category are manufactured products that also are either precast concrete or iron and steel enclosures of intelligent transportation systems and other electronic hardware systems installed in the highway right-of-way or other real property. Fifty-five percent of the iron and steel in those products also would have to be produced in the U.S.

It is possible before all is said and done that FHWA might include other products in that third category. This might include rail ties, elevators, motor and machinery brakes, HVAC products, lighting systems, and highway signs, just to name a few.

One of the key interest groups here is the American Association of State Highway and Transportation Officials (AASHTO) whose members are the state government officials who coordinate contracts for highway projects. The AASHTO’s position has been that the manufactured products exemption should stay as is. The Biden administration is unlikely to comply, which is good news for domestic metal fabricators who will benefit from the new policy.

Another related question is what kind of exemption, if any, FHWA provides for manufactured products that are simply unavailable in the U.S. In those cases, to the extent any of those products include iron and steel components, even their cost would not be added up in the event they reach the 55% domestic content trip wire.

With that question in mind, in a separate request for information, FHWA lists categories of manufactured products—some of which might or might not contain iron and steel—that might be exempt from the new domestic content requirement for manufactured products because they are not available from domestic sources. These categories include: retroreflective sheeting, LED lamps/lighting systems, utility products, traffic signals and controllers, traffic cameras, changeable message signs, and vehicle detection equipment.

With the classification of many products up for grabs, Susan Howard, director of policy and government relations, AASHTO, said, “It is complicated for us. We are muddling through it.”