Buy American/Buy America/ American Iron and Steel It’s Complicated Buy American/Buy America/ American Iron and Steel It’s Complicated! Presentation to WWEMA 44th Washington Forum March 22, 2017 Carolina Mederos Squire Patton Boggs (US) LLP 202-457-5653 carolina.mederos@squirepb.com

Domestic Preference Laws Buy American Act of 1933 (Buy American) Legislative Language: produced in the United States Interpretation: substantial transformation Applications: direct federal procurements; DoD (military bases), GSA, (courthouses, congressional buildings, federal buildings) FAA, Army Corps of Engineers, FHWA Federal Lands Surface Transportation Assistance Act of 1982 (Buy America) Legislative language: produced in the United States Interpretation: all manufacturing processes; melting Applications: FHWA – grants; FTA – Buy America and Buy American

Domestic Preference Laws American Recovery and Reinvestment Act of 2009   Legislative Language: produced in the United States Interpretation: initially varied by agency between Buy America and Buy American; Final – Buy America Consolidated Appropriations Act of 2014 (American Iron and Steel – AIS = Buy America) Legislative language: produced in the United States Interpretation: all manufacturing processes; melting Applications: EPA Clean Water and Drinking Water SRFs

Domestic Preference Laws Water Resources Reform and Development Act of 2014 Codified AIS for Clean Water SRF and WIFIA FY 2015-2017 Appropriations Acts Continued AIS for Drinking Water SRF Water Infrastructure Improvements for the Nation Act 2016 Continued AIS for Drinking Water SRF through FY 2017

Buy American vs. Buy America/AIS Substantial Transformation All U.S. steel producers qualify Changing an article into a new and different article of commerce, with a name, character, or use distinct from that of the original from which it was transformed A change in form and function More than simple assembly or minor finishing

Buy American vs. Buy America/AIS Melting In 1982 all mills melted; integrated mills that made steel by melting raw materials (iron ore, coal) were the only model Buy America was intended to – and did – include the whole US industry The industry changed; Buy America did not In 1982 there were 35 integrated mills; today there are 11 Today the industry is dominated by mills that re-melt steel scrap, not mills that make steel by melting raw materials Slab converters mills “hot roll” to 50-100 degrees short of melting All steel producers in the West are hot rollers/slab convertors No steel producers in the West qualify under Buy America/AIS Manufacturers of steel products need to keep two inventories: Buy American and Buy America

Integrated Mills/Slab Convertors There are only three integrated steel companies with operations in the U.S. Pellets Steelmaking Facility Blast Furnace Slab Caster Iron Ore Sinter Caster Limestone Coke Molten Steel Coal Molten Iron Imports exempt from Buy America Slabs Hot Strip Rolling Reheat Furnace

EAFS/Mini-Mills/Recyclers/Remelters Thin Slab Caster & Hot Rolling Scrap, DRI, Pig Iron Exempt from Buy America Electric Arc Furnace Imports have exemptions and waivers from Buy America

Domestic Steel Sheet & Plate Producers Slab Converters Integrated Mills Electric Arc Furnace Mills 9

Slab Converters Must Comply with Buy America; Other Mills are Exempt or Have Nationwide Waivers Integrated Mills EAFs/Recyclers Slab Converter Mills Key Inputs Buy America Status Coal, Iron Ore, Limestone, Coke Exempt –imports count as U.S. origin Scrap Steel Exempt – imports count as U.S. origin Steel Slabs Subject to Buy America Pig Iron, DRI, Processed, Pelletized and Reduced Iron Ore Waiver—imports count as U.S. origin Pig Iron, DRI, Process, Pelletized and Reduced Iron Ore

Products from Slab Converter Mills Slab converter mills make steel sheet and plate products. They do not make structural steel (i.e. bar, rebar, beams, etc.). End products manufactured from steel sheet and plate that could be used in highway, transit and water projects include: There are only 11 integrated mills and 13 recycling mills in this market. Signage and Sign Posts Culverts Guardrails Pipes Roofing Tubing HVAC Road/Street Plates Ceiling Panels Fencing Utility Boxes and Lighting Boxes Steel Studs Decking and Siding Poles 11

HVAC ducting & components Steel Sheet Products Steel studs Light poles Culvert Steel siding Fencing & fence tubing Grating Roof decking HVAC ducting & components Pipe & tubing Railcars Guard rails Cornerbead Lighting Metal lath HVAC Spiral welded pipe Steel wheels

What is on the Horizon? The Administration Buy American/Hire American What does it mean? Presidential Memorandum for the Secretary of Commerce: Construction of American Pipelines Applies Buy America to private transactions (Buy America and Buy American are tied to federal funding) Specifies “…all manufacturing processes…from the initial melting stage…” Specifically excludes steel products manufactured in the U.S. from semi-finished steel of foreign origin

Congress S. 181 Senator Sherrod Brown (D-OH) Defines “produced in the U.S.” in the law as “all manufacturing processes, from the initial melting stage...” Applies Buy America to DoD, GSA, Army Corps of Engineers, Amtrak, and FAA –currently Buy American. Requires GAO to do a study of agency compliance with Buy America standard. Prohibits spending federal funds for those agencies that do not meet Buy America (by definition, all of those that are Buy American by law.)

Congress H.R. 904 Representative Daniel Lipinski (D-IL) Extends Buy America(n) to passenger facility charges (PFCs)-local airport taxes Extends Buy America to: Department of Agriculture Rural Utilities Service program HUD Community Development Block Grant (CDBG) and HOME programs Department of Interior, Bureau of Reclamation Rural Water Supply program Department of Commerce, Economic Development Administration (EDA) funds used in Clean Water SRF projects DOT/FRA RRIF loan program None of these programs currently covered under any domestic preference standard

Congress H.R. 939 Representative Cheri Bustos (D-IL) Codifies AIS (Buy America) for the Drinking Water SRF Interior Environment Appropriations Bills Chairman Ken Calvert (R-CA) Subcommittee has added language redefining AIS as Buy American (substantial transformation) for Drinking Water and Clean Water SRFs and WIFIA

Buy America vs Buy American Efforts to extend Buy America to additional federal programs and private transactions Keeps out foreign goods; eliminates many U.S. companies and workers as well Limits eligibility to certain specific mills No mills in the Western U.S. qualify   Efforts to redefine Buy America as Buy American Keeps out foreign goods All U.S. mills qualify