The USDA recently filed a request for a six-month waiver from the Build America, Buy America Act (BABA) – more colloquially referred to as the Buy American rules. The IIJA legislation updated the BABA rules to apply to all projects that receive federal funding for infrastructure as of November 18, 2021, the date the IIJA was published in the Federal Register. In the broadband world, this means the updated Buy American rules apply to federal grant programs administered by NTIA, USDA, EDA, and any other agency that awards a broadband infrastructure grant or loan.
The updated Buy America rules include a specific list of materials and components that should be sourced to American companies, including steel, iron, manufactured products, non-ferrous metals, plastic and polymer-based products (including polyvinylchloride, composite building materials, and polymers used in fiber optic cables), glass (including optic glass), lumber, and drywall. That list covers almost every component of building a fiber network. Fiber optic glass must be American-made, as must be the material used in fiber-optic sheaths. Conduit must be American-made. The definition of ‘manufactured items’ in the Act would cover all electronics.
The IIJA goes on to define the specific rules for defining American-made. For manufactured goods (like electronics), at least 55% of the cost of components must be American-made. For construction materials like fiber optic cable and conduit, 100% of the product must be made in the U.S.
For broadband purposes, the USDA 6-month waiver, if awarded, would relax the rules for any ReConnect grants awarded by the agency during that time frame. It’s worth noting that the USDA waiver request covers a lot more than just the ReConnect grants. The agency administers 49 different programs that awarded $40 billion in 2021 for almost 170,000 loans, grants, and loan guarantees – with 82% of the awards being loans or loan guarantees. The USDA has three major programs that involve infrastructure spending – the Rural Housing Service, the Rural Business-Cooperative Service, and the Rural Utility Service. The waiver would apply to all of these USDA programs.
The USDA noted that immediate implementation of Buy American would have negative impacts on rural communities and the economy, such as:
- Delayed deployment of critical broadband, water, and community infrastructure.
- Reduced access to capital for rural businesses and critical community investments such as
schools, hospitals, and first responder facilities.
- Decreased investment for rural clean energy projects and transition away from fossil
- Slowed participation in the new USDA food supply chain programs resulting in
continued food supply chain gaps for the country.
- Underinvestment in the upkeep and upgrading of multi-family housing facilities that
house rural America’s most vulnerable residents.
- Creation of significant barriers to the use of RD programs by socially vulnerable,
distressed and high-poverty rural communities, including communities of color and Tribal
The six-month delay is interesting, and the agency explains the requested delay to provide time for the USDA to work with grant and loan participants to understand how to meet the Buy American requirements. The USDA is not seeking a permanent waiver from Buy American rules, and the White House made it clear earlier this year that it did not want to see a lot of waivers.
If the USDA is granted this waiver, then any winners of the last round of ReConnect (which should be awarded soon) might get some breaks from the Buy American rules. But the USDA waiver makes it clear to me that folks need to be braced for Buy America to apply to the upcoming BEAD grants. I’ve heard folks on industry panels predicting waivers for broadband projects, and my bet is that isn’t going to happen.