‘Buy America’ policy waived for Guam, CNMI and freely associated states

The U.S. Department of Transportation has waived the domestic procurement requirement for U.S. Pacific territories and the freely associated states, noting the challenges impeding their ability to comply with the Buy America Build America Act.

The five-year waiver applies to Guam, the Northern Marianas, American Samoa, Palau, the Federated States of Micronesia and the Marshall Islands, covering awards obligated between Jan. 10, 2025, and Jan. 9, 2030.

The department has awarded the three U.S. territories $132.7 million in grants for 20 capital projects in fiscal 2024.  Palau, the FSM and the Marshall Islands have received $47.6 million in discretionary funds for three projects during the same fiscal year.

Enacted in 2021 as part of the Infrastructure Investment and Jobs Act, the BABA policy requires that federally funded infrastructure projects use U.S.-made iron, steel and other construction materials.

In the Pacific islands, the only readily available and locally produced building materials are aggregates and cement products, which are exempt from BABA requirements, according to Polly E. Trottenberg, DOT deputy secretary.

The temporary BABA waiver initially issued for the six locations in April last year enabled the DOT “to analyze evidence to determine if a long-term waiver of these requirements is in the public interest.”

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During the interim period, the department identified several barriers to the Pacific islands’ BABA compliance, including the issues listed by the U.S. International Trade Commission in a 2023 report.

The report “U.S.-Pacific Islands Trade and Investment: Impediments and Opportunities” noted the geographic isolation, high cost of shipping, dependence on imports, regulatory barriers, limited economies of scale, and environmental challenges as persistent obstacles facing the Pacific islands.

The CNMI and Guam, for example, reported that the cost of shipping construction materials from the continental U.S. was approximately 30 percent more compared to the cost of shipping within Asia.

Located over 5,000 miles from the mainland U.S., the Pacific islands rely on importing products shipped via air or sea.

“These economies have few local heavy manufacturers and largely rely on regional supply chains from east Asia, Australia and New Zealand,” Trottenberg stated in the final rule posted this week on Federal Register.

In American Samoa, officials said the territory can purchase equipment from New Zealand and Australia at “reasonable prices and shorter shipping time,” resulting “in significant cost savings to the grantors.”

“The lack of available land on the Pacific island territories creates barriers for developing new manufacturing and assembly facilities,” Trottenberg said. “For these reasons, the DOT remains concerned that complying with the domestic sourcing requirements may increase already elevated project time and costs.”

The waiver, however, does not apply to “critical” products, such as telecommunications equipment, video surveillance devices, radio frequency devices and cranes.

“While these items are excluded from this general waiver, DOT recognizes that purchases of these items from non-domestic sources as part of a federally-assisted project may be warranted in certain circumstances,” Trottenberg said.

He said DOT will consider requests for potential waivers “on a case-by-case basis, with special attention to any strategic security issues that may be associated with those purchases.”

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