On May 14, the Federal Railroad Administration (“FRA”) posted a reminder that Buy America, a domestic preference law, applies to the Railroad Rehabilitation and Improvement Financing (“RRIF”) program. FRA posted the reminder because many potential RRIF loan and loan guarantee applicants are short line and regional freight railroads and may not be familiar with Buy America requirements.
The RRIF program was established in 1998 under the Transportation Equity Act for the 21st Century of 1998 (“TEA-21”), with subsequent changes to the program coming in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (“SAFETEA-LU”) in 2005 and the Rail Safety Improvement Act of 2008 (“RSIA”). In selecting projects for the RRIF program, the FRA is to give priority to projects that enhance the national rail system, public safety, or the environment; promote economic development and United States companies to be more competitive in international markets; or meet certain other specific goals.
Unlike the Intercity Passenger Rail Service Corridor Capital Assistance program, which includes a specific Buy America requirement, no “Buy America” provision was drafted in the RRIF program statutory framework. However, in September 2010, the FRA articulated its policy of prioritizing projects applying for the RRIF program that comply with a domestic preference requirement.
The rationale for the FRA’s application of a domestic preference requirement falls under two of the eight guiding priorities articulated above: the belief that projects that include a domestic preference promote economic development and that projects that include a domestic preference enable United States companies to be more competitive in international markets. The FRA re-addressed this commitment for a domestic preference requirement under the RRIF program through a Web posting .
In both the September 2010 notice and the Web posting, the FRA identifies four “mitigating factors” pursuant to which a project sponsor may seek a waiver from the domestic preference requirement. The mitigating factors include (i) insufficient quantity, availability and, quality; (ii) unreasonable time constraints in the purchase and delivery of rolling stock or power train equipment; (iii) project costs increases of more than 25% for the inclusion of domestic material; and (iv) inconsistency with the public interest through the application of RRIF domestic preference requirements. FRA posted the reminder because many potential RRIF loan and loan guarantee applicants are short line in regional freight railroads and may not be familiar with Buy America requirements.