Well whatever instructions those are they are wrong.
The external lug is NOT for grounding, it is for bonding.
The bond required in NEC 680.74 is attached there.
This is from the 2005 NEC:
All metal piping systems and all grounded metal parts in contact with the circulating water shall be bonded together using a copper bonding jumper, insulated, covered, or bare, not smaller than 8 AWG solid.