Pa. Steel Products Procurement Act, Revisited

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The Pa. Steel Products Procurement Act became law in 1978 with a stated purpose to protect the U.S. market for steel production and supply.

At its core, the Act provides that, if any steel products are to be used or supplied on a public works project in Pennsylvania, then only “steel products,” as that term is defined in the Act, can be used or supplied on the project.

The Act defines “steel products” as follows:

Products rolled, formed, shaped, drawn, extruded, forged, cast, fabricated or otherwise similarly processed, or processed by a combination of two or more of such operations, from steel made in the United States by the open hearth, basic oxygen, electric furnace, Bessemer or other steel making process and shall include cast iron products and shall include machinery and equipment listed in United States Department of Commerce Standard Industrial Classification 25 (furniture and fixture), 35 (machinery, except electrical) and 37 (transportation equipment) and made of, fabricated from, or containing steel components. If a product contains both foreign and United States steel, such product shall be determined to be a United States steel product only if at least 75% of the cost of the articles, materials and supplies have been mined, produced or manufactured, as the case may be, in the United States. Transportation equipment shall be determined to be a United States steel product if it complies with section 165 of Public Law 97-424 (96 Stat. 2136).

So, what does this mean?

It means that a “steel product” used on a Pennsylvania pubic works project must be from U.S.-made steel.  This includes traditional steel products, such as steel beams and steel rails, items that often come to mind when we think of steel. But, it also includes a variety of machinery and equipment that may not ordinarily come to mind when we think of steel, such as HVAC equipment, furniture, plumbing fixtures, and the like, if they are “made of, fabricated from, or contain[] steel components.

Now, this secondary definition of “steel product” is extremely broad and all-encompassing.  And, what is a “steel component”?  Suppose the machinery or equipment contains a number of different parts or devices, one of which contains some minuscule amount of steel?  Does that mean the machinery or equipment is a product made of steel that must still meet the definition of “steel product”? These supplementary questions are not answered by the Act, and there are no court cases that interpret the Act in any helpful way.

If the “steel product” contains any foreign-made steel, the Act provides that it is a U.S. steel product only if 75% of the cost of the product has been mined, produced, or manufactured in the United States.  Form ST-3 is completed by the fabricator of a steel product containing U.S. and foreign steel.

There are two exceptions to the Act. The first is where the head of the public agency makes a written determination that a “steel product” is not produced in the U.S. in sufficient quantities to meet the requirements of the contract in question.  The second is where the “steel product” appears on the Department of General Services (DGS) list of exempt machinery and equipment steel products that were not produced in the United States in sufficient quantities in the previous calendar year.  The most current exempt list for 2016 can be found here.

Contractors performing general construction work for public entities in the Commonwealth must be especially vigilent in their compliance with the requirements of the Act, as there are grave consequences for a violation of the Act, including the withholding of payment and, in the case of a willful violation, a 5-year debarment.  There have even been civil prosecutions for violation of the Act, as explained here.

DGS has created an FAQ on the Act which was last updated in 2013 and can be found here, although in my view the FAQ creates even more questions than it provides answers.

If you need further assistance on this topic, call or email me for a free consultation.

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Posted on by Christopher I. McCabe, Esq. in Steel Products Act Leave a comment