The smith is inside the harbour building (door on the side of the building in front of the elevator platform); after you enter and turn right, keep going and you can find him standing near the door of a caged off room. At level 37 I am still using that bow (having equipped it as soon as I reached level 28).
The smith did not have that bow in D2:ED, and I don't know if FoV adds it or not.
