Buy America: Quebec companies forced to buy more from the United States

The bus manufacturers Prévost and Nova Bus have increased their purchases from suppliers in the United States in order to adjust to the strengthening of the Buy Americathe threshold of which rose from 60 to 65% on 1 October.

“We knew that this increase was coming, and we prepared by working more with our American suppliers”, explains Emmanuelle Toussaint, vice-president, communication and legal and regulatory affairs, at Prévost and Novabus, owned by the Swedish company. Volvo Buses.

The clause of Buy America concerns only public transport, unlike that of the Buy American which, in turn, covers all US government purchases of goods (but does not apply to services).

Since October 1, the Buy America prescribes a threshold of 65% US content for public transportation projects (subway, commuter rail, bus, etc.) that include federal government subsidies in the United States.

And the final assembly must be completely done on American soil.

the Buy America at 70% from October 2019

However, this threshold will rise to 70% on October 1, 2019, according to the Fixing America’s Surface Transportation Act (FAST Act), a regulation adopted in December 2015 by the Obama administration.

For the moment, the increase in supplies from American suppliers would not have had an impact on the Canadian suppliers of Prévost and Nova Bus, at least according to Emmanuelle Toussaint.

“I don’t think it had an impact in Canada,” she says.

Nova Bus has three plants in North America: two in Quebec (in Saint-François-du-Lac and Saint-Eustache) and one in the United States (in Plattsburgh, New York).

For its part, Prévost has a single plant in Canada, in Sainte-Claire-de-Bellechasse, near Lévis. But it also has a production site in Plattsburgh, near that of Novabus.

All Novas Bus vehicles sold in the United States are covered by the Buy Americabecause they are sold to public transport companies, such as the Montreal Transit Company (STM). That’s why Nova Bus assembles them in Plattsburgh.

The situation is different on the Prévost side.

The buses it sells to private companies in the United States are not affected by the Buy America. Prévost therefore manufactures them at its Sainte-Claire-de-Bellechasse plant.

On the other hand, vehicles sold to public transport companies in order to make the connection between the city centers and the peripheral municipalities, such as the Metropolitain Transportation Authorithy (MTA) in New York, are manufactured in Plattsburgh.

The two companies do not disclose their earnings. That said, Nova Bus sells about half of its production in Canada, while Prévost sells the majority of its production in the United States.

Quebec production at risk if Trump strengthens the Buy America

Prévost and Nova Bus are already preparing for the next increase in the threshold for Buy Americain October 2019.

The strategy is simple: Both companies will further increase the US portion of their sourcing to meet the minimum 70% US content threshold.

“An increase of 60 to 70% is viable,” emphasizes Emmanuelle Toussaint.

However, if the Trump administration increases this threshold further, it could put production at the Nova Bus plant in Saint-François-du-Lac, which manufactures the structures for all its vehicles sold in North America, at risk.

“We can continue to use our structures made here with a percentage of 60, 65, or 70%,” she said. But a percentage higher than 70% would force us to review our supply chain more thoroughly.”

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