“Buy America” provisions in the American Recovery and Reinvestment Act (Pub. L. No. 111-5) are delaying water projects as utility representatives struggle to implement the provisions in a manner consistent with trade agreements and an integrated global manufacturing system, according to water utility and U.S. business officials.

“Our members are concerned about bidding for projects. In the context of the [economic] stimulus, the Buy America provisions are counterproductive. We're seeing jobs put on hold,” Nathan Gardner-Andrews, counsel for the National Association of Clean Water Agencies, told BNA June 11.

Many wastewater treatment plants use pumps, computer equipment, electronic components, and filtration membranes that are either not produced domestically or would cost substantially more if they were. Some are produced by foreign companies, some are produced by American companies that manufacture the parts overseas, Gardner-Andrews told BNA.
To rebid or rewrite specifications for these projects would be very expensive, he said.

Waiver Address Only Part of Problem
To address these concerns, EPA issued waivers to the Buy America provisions June 2. But the waivers only address part of the problem, Gardner-Andrews said (103 DEN A-8, 6/2/09).

The waivers would exempt from the Buy America provisions projects bid between Oct. 1, 2008, and Feb. 17, 2009, when the law was enacted.
“There were a number of projects that fell in that window that might have bid with the expectation of getting stimulus funds,” Gardner-Andrews said.

A “de minimis” waiver would exempt such incidental components such as nuts and bolts, belts, gaskets, fasteners, and screws as long as the cost does not exceed 5 percent of the project's total cost.

Section 1605 of the Recovery Act requires the use of American iron, steel, and manufactured goods in public works using the stimulus funds unless an agency concludes this “would be inconsistent with the public interest.” The act allocated $6 billion for state clean water and drinking water revolving funds.

A provision in the act would allow a bid recipient to seek a waiver if: iron, steel, and relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of satisfactory quality; or inclusion of iron, steel, and manufactured goods produced in the United States would increase a project cost by more than 25 percent.

Dawn Champney, president of the Water and Wastewater Equipment Manufacturers Association, told BNA June 11 the biggest issue is the inability of municipalities to continue having access to the best and most cost-effective technology. “The Buy America provision is very bad policy,” she said.

For example, she said, Zenon, a Canadian company owned by Danaher Corp., which is headquartered in Washington, D.C., manufactures a water treatment removal technology used by many U.S. wastewater treatment plant systems.

Provision Lacks Clarity, U.S. Chamber Says
During a U.S. Chamber of Commerce news conference June 11, chamber officials expressed concern over the Buy America provisions and their impact on U.S. jobs and international trade. The provisions lack flexibility and clarity, they said.

“The provision is really going to cost us a lot of jobs. Certain state and local governments do not know what they should be doing,” said Meyer Brilliant, chamber senior vice president of international affairs. Brilliant said foreign companies also do not understand the new provisions.
The chamber wants the White House Office of Management and Budget to provide more specific guidance.

OMB on April 23 issued interim final rules on certain requirements for financial assistance in the Recovery Act, including the Buy America provision. Comments are due June 22 (74 Fed. Reg. 18,449).

Brilliant warned that other countries could retaliate if the provisions hinder the United States from abiding by international trade obligations. “We don't want our friends in Canada to be harmed by implications at the state and local level,” he said.

In a letter to members of Congress June 2, R. Bruce Josten, the Chamber of Commerce's executive vice president of government affairs, said “it appears ARRA funds are being disbursed at the federal level in a manner consistent with U.S. obligations under international agreements.”

Major Impact on State, Local Governments
However, local governments are not bound by the international agreements, nor are many state governments, which will distribute the funds.
“As a result, the ‘Buy America' requirements are having a major impact on projects administered by state and local governments, resulting in declining trade and lost jobs for American workers,” Josten wrote.

This is particularly damaging to the U.S. business partnership with Canada—America's largest trading partner, he wrote.

In drinking water and wastewater projects, for example, Canadian firms are now being excluded from U.S. municipal contracts, the letter said, and retaliation by Canadian municipalities could result in $3 billion in lost business for U.S. water and wastewater equipment manufacturers.

In addition, the letter said, many U.S. manufacturers rely on global production chains that integrate components from U.S. and foreign sources. It is almost impossible to avoid using at least a portion of a product that comes from other countries, Josten added.

The Federation of Canadian Municipalities said the provision is contrary to the spirit of free trade. The U.S. Chamber of Commerce and the Canadian federation have called for bilateral negotiations to resolve the issue, chamber representatives said June 11.

By Linda Roeder