Korean construction materials makers on edge over 'Buy America' requirements

U.S. President Joe Biden delivers his State of the Union address during a joint meeting of Congress in the House Chamber of the U.S. Capitol in Washington, D.C., Feb. 7. AFP-Yonhap

By Park Jae-hyuk

U.S. President Joe Biden's protectionist “Buy America” policies have begun to affect the Korean construction industry, in addition to the automobile and semiconductor industries, which have already struggled to comply with the Inflation Reduction Act and the CHIPS for America Act, respectively, according to industry officials, Monday.

The White House Office of Management and Budget (OMB) detailed last Thursday (local time) seven types of construction materials that should be produced in the U.S. so that they can be used in federal infrastructure projects.

The proposed guidance outlined the seven types of construction materials to be non-ferrous metals, plastic and polymer-based products, glass, fiber optic cable, optical fiber, lumber and drywall.

This came as Biden announced in his State of the Union speech last Tuesday that new standards will be required for all construction materials used in federal infrastructure projects to be made in America.

“American-made lumber, glass, drywall, fiber optic cables. And on my watch, American roads, American bridges, and American highways will be made with American products,” the U.S. president said at that time.

The Infrastructure Investment and Jobs Act, signed into law by Biden in 2021, requires each covered Federal agency's head to ensure that “none of the funds made available for a Federal financial assistance program for infrastructure may be obligated for a project unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the U.S.”

The latest guidance mentioned more details about the “construction materials” and which of them can be recognized as U.S.-made.

In response to the guidance, the Korea Trade-Investment Promotion Agency (KOTRA) pointed out concerns among U.S. construction industry, saying most American builders have faced setbacks in satisfying the requirements.

“Korean exporters will face obstacles to the U.S. procurements market, so the government and companies need to look for detours,” the agency said.

Korean firms have rarely supplied their construction materials directly for the U.S. federal infrastructure projects.

The Korea Petrochemical Industry Association, however, expected some Korean companies to face negative impacts. Particularly if they have exported their raw materials to Chinese construction materials producers to produce and export their products for federal infrastructure projects.

Concerns also remain over the possibility of the imposition of similar regulations on private-sector projects, according to the Korea International Trade Association.

In addition, Korean construction equipment makers without manufacturing facilities in the U.S. could suffer setbacks in their sales there, if the Biden administration tightens the Buy America requirements.

Unlike Doosan Bobcat which has factories in the U.S., Hyundai Doosan Infracore and Hyundai Construction Equipment have produced their products in Korea and exported them to the U.S.

Hyundai Genuine, the parent of the two construction equipment manufacturers, however, has remained uncertain about its U.S. production, given that it remains unclear whether the Biden government will force builders to use construction equipment made in America.