EPA proposes new BABA waiver for iron and steel product components

The U.S. Environmental Protection Agency (EPA) is seeking comments on a new proposed public interest waiver for the Build America, Buy America (BABA) Act.

The proposed Public Interest Minor Components of Iron and Steel Products Waiver would allow manufacturers to use a small amount of non-domestic iron and steel components within otherwise domestically manufactured iron and steel products.

The waiver would affect only components of iron and steel products covered by BABA. Under the proposed waiver, the EPA would allow up to 5% of a product’s total material cost to include miscellaneous minor iron or steel components that were not domestically produced — and without further need for product-specific waivers.

The agency says that it only anticipates using the waiver for a specific subset of iron and steel products: the cost of items would tend to be less than $100 per product and, rarely, would apply to more than $500 of minor components for “an extremely large Iron and Steel product.”

As part of the public comment period, EPA is particularly interested in whether commenters think that the waiver should increase or decrease the 5% threshold.

EPA hopes that this waiver will reduce the administrative burden on manufacturers over minor or trivial components, instead focusing needs on higher-value items.

“The Agency is committed to robust implementation of the Act’s Buy America Preference in an efficient and effective manner,” writes EPA in the waiver. “Absent this waiver, manufacturers will face considerable challenges determining that their iron and steel products, which may contain trivial components of foreign or unknown origin, are compliant with Build America, Buy America.”

Without the waiver, EPA says that many infrastructure products would submit nonavailability waiver requests, seeking an altogether non-domestically sourced product.

EPA notes that this waiver for manufacturers is different from EPA’s existing De Minimis waiver, which waives entire products that are no more than a total of 5% of a project’s cost such as nuts and bolts.

The water industry is facing several challenges in BABA's implementation — particularly in its rapid implementation. With many exemptions expiring in early 2023 and EPA still producing additional guidance, manufacturers and project managers are looking for clarity.

"EPA’s proposed waiver is a reminder of the complexity of implementing this new provision, its unintended consequences, and the importance of providing water technology manufacturing companies with additional clarity," said Josh Mahan, director of government and industry relations for Xylem. "The water sector needs additional time to understand the evolving regulatory landscape, to ensure federal financial assistance reaches the communities that need it, while realizing the goals of the BABA provision."

The Build America, Buy America Act

BABA was passed in November 2021 as part of the Infrastructure Investment and Jobs Act (IIJA), as part of an initiative to build a resilient supply chain and manufacturing base within the U.S. The act requires that all iron, steel, manufactured products, and construction materials used in infrastructure projects are produced in the U.S.

Exceptions for this requirement can be made by the heads of relevant Federal agencies, such as the EPA. To do so, the agency first post a proposed waiver online for 15 days to allow the public to submit comments, as is the case with this latest public interest waiver.

For this waiver, the phrase “public interest” ties it to a specific section of the IIJA — Section 70914(b)(1) — which allows the agency head to waive BABA requirements if their implementation would be inconsistent with public interest.