United Blower v. Lycoming Water & Sewer, Aplt ( 2021 )

[J-35-2021]
IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT
BAER, C.J., SAYLOR, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.
UNITED BLOWER, INC. : No. 3 MAP 2021
:
: Appeal from the Order of
v. : Commonwealth Court at No. 1383
: CD 2019 dated July 13, 2020
: Affirming the Order of the Lycoming
LYCOMING COUNTY WATER AND : County Court of Common Pleas,
SEWER AUTHORITY : Civil Division, dated August 20, 2019
: at Nos. CV-15-00619 & CV-15-
G.M. MCCROSSIN, INC. : 00623.
:
: ARGUED: May 18, 2021
v. :
:
:
LYCOMING COUNTY WATER AND :
SEWER AUTHORITY :
:
:
APPEAL OF: LYCOMING COUNTY :
WATER AND SEWER AUTHORITY :
OPINION
JUSTICE WECHT DECIDED: September 22, 2021
In a case of first impression, we granted review to determine whether the
Commonwealth Court properly calculated the “cost” of steel products under the Steel
Products Procurement Act (“Steel Act” or “the Act”),1 which requires that “75% of the cost
of the articles, materials and supplies [of a steel product] have been mined, produced or
1 See Act of March 3, 1978, Pub. L. 6, No. 3 (codified as amended at 73 P.S.
§§ 1881-1889).
manufactured” in the United States. 73 P.S. § 1886. Because we hold that the
Commonwealth Court improperly calculated the cost of the steel products at issue, we
reverse and remand.
I. The Steel Act
The United States’ willingness to combat domestic economic concerns with
protectionist2 measures dates to the earliest days of the republic.3 However, the modern
trend of mandating the use of American-made products in public works projects dates to
1933 with the passage of the “Buy American Act,”4 which directs that “only . . . articles,
materials, and supplies that have been mined, produced, or manufactured in the United
States . . . shall be acquired for public use.” 41 U.S.C. § 8302(a)(1). In the following
decades, several states enacted similar statutes mirroring the federal act, 5 and
2 We intend the adjective here as descriptive rather than pejorative.
3 See generally Tariff Act of 1789, ch. 2, 1 Stat. 24, § 1 (“Whereas it is necessary
for the support of government, for the discharge of the debts of the United States, and the
encouragement and protection of manufactures, that duties be laid on goods, wares and
merchandises imported . . . .” (emphasis added)); see also ALEXANDER HAMILTON, Report
on the Subject of Manufactures, in W RITINGS 647, 697-703 (Joanne B. Freeman ed., The
Library of America 2001) (1791) (discussing the efficacy of tariffs, embargoes, and
subsidies as means of protecting the United States’ nascent manufacturers).
4 Act of March 3, 1933, ch. 212, tit. III, 47 Stat. 1489 (codified as amended at
41 U.S.C. §§ 8301-8305); see also Textron, Inc., Bell Helicopter Textron Div. v. Adams,
493 F. Supp. 824, 830 (D.D.C. 1980) (“The Act was designed during the Depression as
a device to foster and protect American industry, American workers and American
invested capital; and for its first twenty years of existence it operated as a super tariff
imposed on foreign manufacturers seeking to do business with the American
government.” (cleaned up)).
5 See, e.g., ALA. CODE § 39-3-1(a) (requiring all firms undertaking public works
projects to “agree[] to use . . . [only] materials, supplies, and products manufactured,
mined, processed or otherwise produced in the United States”); 30 ILL.C.S. 565/4 (“Each
contract for . . . public works . . . shall contain a provision that steel products used or
supplied in the performance of that contract . . . shall be manufactured or produced in the
United States.”); MD. STATE FIN. & PROC. CODE § 17-303(a)(1) (requiring that only
“American steel products” be used in the performance of a public works projects); R.I.
[J-35-2021] - 2
Pennsylvania was no exception. In 1978, the General Assembly passed the Steel Act,
embodying “the policy of the Commonwealth of Pennsylvania that all public officers and
agencies should, at all times, aid and promote the development of the steel industry of
the United States in order to stimulate and improve the economic well-being of the
Commonwealth and its people.” 73 P.S. § 1883; see also id. § 1882 (“This act shall be
deemed to be an exercise of the police powers of the Commonwealth for the protection
of the health, safety and general welfare of the people of the Commonwealth.”).
Section 4 of the Steel Act provides:
Every public agency shall require that every contract document for the
construction, reconstruction, alteration, repair, improvement or
maintenance of public works contain a provision that, if any steel products
are to be used or supplied in the performance of the contract, only steel
products as herein defined shall be used or supplied in the performance of
the contract or any subcontracts thereunder.
Id. § 1884(a).
The Act’s definition of “steel products” is at issue here. Specifically, we inquire
whether a particular product that contains both foreign and domestic steel satisfies the
domestic requirement. In relevant part, the Steel Act provides:
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.
Id. § 1886.
Regarding payments for non-conforming steel products, Section 5 of the Act
provides:
GEN. LAWS § 37-2.1-3(a) (requiring that “only steel products as herein defined shall be
used or supplied in the performance of” public works projects); W. VA. CODE § 5-19-2(a)
(requiring any aluminum, glass, or steel products used in public works projects be
produced domestically).
[J-35-2021] - 3
No public agency shall authorize, provide for or make any payments to any
person under any contract containing the provision required by section 4
unless, when unidentified steel products are supplied under a contract, such
person has provided documentation including, but not limited to, invoices,
bills of lading, and mill certification that the steel was melted and
manufactured in the United States, which establish that such person has
fully complied with such provision. If a steel product is identifiable from its
face, such person must submit certification which satisfies the public agency
that such person has fully complied with the provision required by section 4.
Any such payments made to any person by any public agency which should
not have been made as a result of this section shall be recoverable directly
from the contractor, subcontractor, manufacturer or supplier who did not
comply with section 4 by either such public agency or the Attorney General
of Pennsylvania.
Id. § 1885(a).
II. Factual and Procedural History
G. M. McCrossin, Inc. (“McCrossin”), a contracting and construction management
firm, served as the general contractor for the Lycoming County Water and Sewer
Authority (“Authority”) on a project known as the Montoursville Regional Sewer System
Waste Water Treatment Plan, Phase I Upgrade (“Project”). In July 2011, McCrossin
entered into an agreement with the Authority to supply eight air blower assemblies, which
move air from one area to another inside the waste treatment facility. In August 2011,
McCrossin and the Authority agreed to a change order for McCrossin to supply and install
three new digestive blowers to replace existing digestive blowers. The change order was
approved, and United Blower, Inc. (“UBI”), became a subcontractor on the Project. UBI
was to supply the eight blowers required by the original specifications and was to replace
the three digestive blowers as required by the change order.
UBI prepared a submittal for the blowers which McCrossin in turn submitted to the
Authority’s Project engineer, Brinjac Engineering (“Brinjac”). As part of the submittal,
[J-35-2021] - 4
McCrossin provided Brinjac and the Authority with an ST-3 form,6 which verified that 75%
of the cost of the blowers was attributable to articles, materials, and supplies (“AMSs”)
that were mined, produced, or manufactured in the United States. The total amount
McCrossin paid UBI for the blower assemblies and digestive blowers was $239,800. The
amount paid by the Authority to McCrossin for these items was $243,505.
Authority employees began to question whether McCrossin and UBI provided
products that complied with the Steel Act.7 Ultimately, the Authority held a hearing on the
matter on September 23, 2014. Thereafter, the Authority issued an adjudication in which
it determined that, while McCrossin and UBI had not willfully violated the Steel Act, they
had failed to provide steel products as defined therein.
McCrossin and UBI appealed the Authority’s adjudication to the Lycoming County
Court of Common Pleas. The trial court remanded the matter to the Authority to be heard
by an independent hearing officer and directed the officer to issue findings of fact and
conclusions of law for adoption by the Authority, which would nullify and supersede the
Authority’s previous findings of fact, conclusions of law, and adjudication. The Authority
adopted the hearing officer’s ensuing findings and conclusions, and issued its
adjudication on December 6, 2017.
Relevant to the present appeal, the hearing officer addressed whether 75% or
more of the steel products provided by UBI were manufactured in the United States as
required by the Steel Act. To that end, the hearing officer examined a 10% deduction
6 The Pennsylvania Department of General Services developed this form for use in
public works projects involving steel products as a means to ensure compliance with the
Steel Act.
7 It is unclear when exactly the Authority first suspected a potential violation of the
Steel Act. However, there is an email in the record from the Authority dated March 7,
2013, raising concerns over “what appears to be a significant portion of the materials
being marked to have been made and/or assembled in China.” R.R. at 857.
[J-35-2021] - 5
that UBI applied to the costs of blower components purchased from third parties. These
third parties provided letters attesting that 10% of the costs listed on their invoices
encompassed importation, warehousing, and shipping, while the other 90% represented
the value of the foreign component being sold. Applying the 10% deduction, the total cost
of the foreign components came to $59,655. Comparing that amount to the amount UBI
charged McCrossin ($239,800), the hearing officer concluded that the foreign steel costs
came to 24.88% of the total cost of the Project. This percentage was lower still if
compared to the amount McCrossin charged the Authority ($243,505). However, the
hearing officer found it inappropriate to allow the 10% deduction because the invoices did
not itemize the specific costs of importing, storing, and shipping the components. Thus,
without the 10% deduction, the foreign steel costs came to $67,340, which exceeds 25%
regardless of the chosen denominator.8
The hearing officer also determined that the appropriate denominator was the
amount McCrossin paid UBI, not what the Authority paid McCrossin. As the hearing
officer explained:
[W]hen determining the total cost of the steel product (the [denominator] of
the equation), it is most appropriate to use the cost to McCrossin, not the
cost to the Authority. Otherwise, simply by marking up the cost of the steel
product more, the contractor could create a result that would result in a
determination that the product is domestic rather than foreign. To comply
with the requirements of the [Steel] Act, the cost to the contractor is the
appropriate measuring stick, not the price that the contractor charges the
customer.
Hr’g Officer’s Adjudication at 12. Therefore, the hearing officer calculated the foreign
steel costs as 28% of the total ($67,340 divided by $239,800).
8 The hearing officer derived this total amount from Exhibit UBI-7, the handwritten
notes of UBI’s President, Wiekert Miolee. Reducing this sum by 10% yields $60,606, not
$59,655. But using $60,606 as the numerator and the amount the Authority paid
McCrossin ($243,505) as the denominator makes foreign steel costs 24.89% of the total,
which also would qualify the blowers as United States steel products under the Act.
[J-35-2021] - 6
In sum, the hearing officer reached the following conclusions of law:
The blower assemblies contain both foreign and United States steel.
The blowers inserted into the pre-existing assemblies at the Authority’s
plant . . . contain solely foreign steel.
****
Less than 75% of the cost of the steel in the blower assemblies and blowers,
when considered as a unit, represent steel that has been mined, produced,
or manufactured in the United States.
The blower assemblies and blowers, when considered as a unit, are not
“United States steel products” as defined by the Act.
Id. at 14 (numbering omitted).
McCrossin and UBI appealed. On July 31, 2019, the trial court reversed the
Authority’s adjudication. The court found, inter alia, that the hearing officer and the
Authority did not properly calculate the United States-based steel content of the blowers
under review. The court held that the hearing officer should have taken into account
evidence of UBI’s vendors’ “markups,” and that, if this 10% of the total cost had been
considered, the percentage of foreign content would have been lower than 25%. Thus,
the trial court reversed the adjudication, and the Authority timely appealed.
In a unanimous memorandum, the Commonwealth Court affirmed. United Blower,
Inc. v. Lycoming Cty. Water & Sewer Auth., 1383 CD 2019, 2020 WL 3957316 (Pa.
Cmwlth. July 13, 2020). The court began by analyzing whether 75% of the “cost” of the
AMSs that went into the blowers was mined, produced, or manufactured in the United
States, ultimately agreeing with the trial court’s observations:
The term “cost” was not included in the original version of the Steel Act,
and, in fact, was not added until the Steel Act was amended in 1984. No
definition of “cost” is provided in the statute, but Merriam-Webster Dictionary
defines “cost” as: “the amount or equivalent paid or charged for something”
or “the outlay or expenditure . . . made to achieve an object.” Although
there is a dearth of guidance on the interpretation of the word “cost” in the
[J-35-2021] - 7
context of the Steel Act’s definition of steel products, we view “cost,” in light
of its definition, to include a wide array of factors to be considered when
assigning value to a product or service. Accordingly, it does not seem
unreasonable to us that the Trial Court interpreted the Steel Act differently
than the Hearing Officer when calculating the percentage of foreign steel in
UBI’s product.
****
The Trial Court applied the law differently [than the hearing officer] to give
effect to all aspects involved in the cost of the articles, thus recognizing a
portion of same was attributable to value added domestically. The Trial
Court determined that shipping and other costs should be included in the
total “cost” of the articles, and if domestic in nature, should not be counted
against UBI. This is consistent with the definition of the term “cost,” which
broadly includes all of the outlay/expenditure involved in achieving a final
product.
Id. at *11 (footnotes omitted).
The Commonwealth Court then applied this understanding to the products at issue.
First, the court agreed with the trial court’s determination that the numerator for purposes
of determining the foreign component of the product was $59,655. Regarding the
denominator, the court continued:
[T]he Steel Act unquestionably puts its focus on the public agency’s
payment to the contractor. In the present matter, that would implicate the
$243,505 paid to McCrossin by the Authority. However, here, it is not clear
to us which total amount UBI was considering when it signed the ST-3 form,
i.e., the $239,800 it was paid by McCrossin or the $243,505 McCrossin was
to be paid (and ultimately was) by Authority. Regardless, both calculations
result in a foreign component under 25% ($59,655 divided by $243,505
results in a percentage of 24.5%, whereas $59,655 divided by $239,800
results in a percentage of 24.9%).
Id. (citation omitted). Thus, the Commonwealth Court held that McCrossin and UBI did
not violate the Steel Act.
The Authority sought allowance of appeal in this Court. We granted review to
consider the following question:
Did the Commonwealth Court err as a matter of law in affirming the trial
court's calculation of the “cost” of steel products pursuant to the Steel
[J-35-2021] - 8
Products Procurement Act, 73 P.S. § 1886, that requires “75% of the cost
of the articles, materials and supplies [of a steel product to] have been
mined, produced or manufactured” in the United States?
United Blower, Inc. v. Lycoming Cty. Water & Sewer Auth., 243 A.3d 972, 973 (Pa. 2021)
(per curiam). This question is one of statutory interpretation and therefore presents a
pure question of law. Meyer v. Cmty. Coll. of Beaver Cty., 93 A.3d 806, 813 (Pa. 2014).
Our scope of review is plenary, and our standard of review is de novo. Id.III. Parties’ Arguments9
The Authority argues that the plain language of the Steel Act precludes a deduction
for the importation, warehousing, and shipping costs of foreign steel products:
There is nothing within the definition of “Steel Products” that allows a
supplier to shave off from the total foreign steel cost amounts for
importation, warehousing, marketing, and shipping costs incurred by a
foreign manufacturer . . . . The focus of the calculation must be on how
much money was paid by the supplier to the domestic steel producers,
which amount must be no less than 75% of the total. There is nothing within
the Act that allows amounts paid by the supplier to a foreign manufacturer
to be included on the domestic side of the equation.
Authority’s Br. at 22-23 (emphasis in original). Thus, the Authority maintains, the hearing
officer correctly excluded these costs and calculated the foreign steel costs at the full
$67,340. Using this sum as the numerator and the amount McCrossin paid UBI as the
denominator ($239,800), the hearing officer properly determined that the foreign steel
9 The parties argue issues that are beyond the scope of the present appeal. See,
e.g., Authority’s Br. at 41-54 (addressing a number of alleged factual and legal errors that
the Commonwealth Court did not reach); see also McCrossin’s Br. at 24-30 (arguing that
the Commonwealth Court’s dicta regarding remedy was correct). In particular, both UBI
and McCrossin raise the issue of whether the three digestive blowers included in the
change order were provided gratis and, thus, should have been excluded from the cost
calculation. UBI’s Br. at 28-29; McCrossin’s Br. at 20-21. While the trial court resolved
this factual question in UBI’s and McCrossin’s favor, see Tr. Ct. Order, 07/31/2019, at 2
(unnumbered), the Commonwealth Court confined its analysis to the statutory question.
Although these issues may be raised again on remand, they do not bear on whether the
10% deduction for domestic overhead of foreign AMSs and the choice of denominator
were proper in calculating the cost of the products under review.
[J-35-2021] - 9
costs came to 28%. See id. at 23-25; see also id. at 34 (arguing that this formula “left no
opportunity for manipulation”).
UBI counters that, although neither the trial court nor the Commonwealth Court
explicitly couched their analyses in these terms, the word “cost” as used in Section 6 of
the Steel Act was susceptible of two or more reasonable interpretations, and the lower
courts correctly resolved the ambiguity. See UBI’s Br. at 26. UBI maintains that the Steel
Act does not specify at what “level” the transaction costs should be calculated. “‘Cost’
could mean the ‘cost’ to the Authority [ ] or the ‘cost’ to the [c]ontractor. It could mean
UBI’s ‘costs’ or the ‘costs’ to UBI’s suppliers.” Id. at 26. UBI submits that “the Steel Act
proscribes only the payment for non-complaint [sic] ‘steel products.’ There is no
prohibition on the ‘supply’ or ‘use’ of non-compliant ‘steel products.’” Id. at 27 (emphasis
in original).
In that same vein, UBI claims that the Steel Act “provides no formulaic guidance
and there is a dearth of decisional law regarding ‘calculations.’” Id. at 31 n.20. While the
Authority “has repeatedly argued that the Hearing Officer appropriately used the cost to
the contractor and the amount paid to the foreign manufacturer as the measuring stick,”
UBI notes that “nowhere does the Authority state why this is correct.” Id. at 31-32(emphasis in original). Instead, UBI contends that both the trial court and the
Commonwealth Court applied the correct interpretation of Section 6. See id. at 32.
Likewise, McCrossin argues that Section 6 of the Steel Act is ambiguous because
the statute does not define the word “cost” and the word has not “acquired specialized
meaning.” McCrossin’s Br. at 17-18. Consequently, the Commonwealth Court properly
resorted to the dictionary to define “cost” as “‘the amount or equivalent paid or charge[d]
for something’ or ‘the outlay or expenditure . . . made to achieve an object.’” Id. at 18. In
light of this expansive definition of “cost,” McCrossin contends that both the trial court and
[J-35-2021] - 10
the Commonwealth Court properly considered the domestic overhead costs of the foreign
steel products, because those costs unquestionably are outlays or expenditures in service
of producing an American steel product. See id. As for the proper denominator,
McCrossin argues that it is not the amount UBI charged McCrossin ($239,800), but rather
the amount the Authority paid McCrossin ($243,505). Id. at 19. McCrossin supports this
position by noting that “the Steel Act only prohibits public owners from ‘paying’ for foreign
steel.” Id. Thus, McCrossin maintains that, consistent with the Steel Act, the focus must
be on what the Authority paid McCrossin, not what McCrossin paid UBI. Hence, the
denominator of $239,800.
IV. Discussion
Our interpretation of the Steel Act is governed by the Statutory Construction Act,10
which requires that we “ascertain and effectuate the intention of the General Assembly.”
1 Pa.C.S. § 1921(a). The best indication of legislative intent is the statute’s plain
language. Commonwealth v. Griffith, 32 A.3d 1231, 1235 (Pa. 2011). Accordingly,
“[w]hen the words of a statute are clear and free from all ambiguity, the letter of it is not
to be disregarded under the pretext of pursuing its spirit.” 1 Pa.C.S. § 1921(b). Words
and phrases within a statute must be “construed according to rules of grammar and
according to their common and approved usage,” id. § 1903(a), and must be read within
the context of the surrounding statutory language. Gavin v. Loeffelbein, 205 A.3d 1209,
1221 (Pa. 2019). We also are mindful of the General Assembly’s own interpretive
guidance regarding the Steel Act:
This act is intended as remedial legislation designed to promote the general
welfare and stimulate the economy of the Commonwealth and its people
and each and every provision hereof is intended to receive a liberal
construction such as will best effectuate that purpose and no provision is
intended to receive a strict or limited construction.
10 1 Pa.C.S. §§ 1501-1991.
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73 P.S. § 1887.
Section 6 of the Act provides that, should a steel product contain both domestic
and foreign 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 . . . in the United States.” Id. § 1886 (emphasis added). The
Steel Act offers no definition of the word “cost,” but it is a word with a “common and
approved usage.” Moreover, there is no basis upon which to conclude that it possesses
a technical or peculiar meaning.11 Notwithstanding UBI’s and McCrossin’s arguments to
the contrary, this does not render the word ambiguous. Rather, “cost” must be construed
according to its “common and approved usage.” The noun “cost” means “the price paid
to acquire, produce, accomplish, or maintain anything” or “an outlay or expenditure of
money, time, labor, trouble, etc.”12 On this definition, “cost” must encompass all aspects
of the price paid to acquire the AMSs that make up a steel product. This would include
not only the expense of the raw material, but also associated expenses, including labor,
warehousing, marketing, transportation, and intermediary mark-ups—some combination
of which savvy consumers—and more importantly for our purposes, legislators—
understand are folded into the final cost to procure any finished product. The price UBI
paid to acquire the AMSs that it needed to construct the blowers came at a cost
comprising some combination of the above factors. To disassemble the complex
machinery of commerce in the artificial fashion urged by UBI and McCrossin would
11 See Commonwealth v. Jarowecki, 985 A.2d 955, 959 (Pa. 2009) (“We construe
statutory language according to its common and approved usage, unless particular words
and phrases have acquired a peculiar and appropriate meaning.”) (cleaned up).
12 Cost, DICTIONARY.COM, https://www.dictionary.com/browse/cost (last visited June
8, 2021); see also Cost, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining “cost” to mean
“[t]he amount paid or charged for something; price or expenditure”).
[J-35-2021] - 12
require us to depart from the statutory language, rather than reading it consistently with
its common and approved usage.
That said, for the AMSs to satisfy the domestic cost percentage, Section 6 requires
that at least 75% of the total cost of all the AMSs must come from AMSs that “have been
mined, produced, or manufactured . . . in the United States.” Id. UBI concedes that it
sourced foreign AMSs from third parties, but it claims that 10% of the cost of those foreign
AMSs reflect overhead for importation, warehousing, and logistics that occurred in the
United States. While these overhead costs undoubtedly represent, as the
Commonwealth Court put it, “value added domestically,” that does not change the fact
that the foreign AMSs were mined, produced, or manufactured abroad. Moreover, per
the above definition of “cost,” those overhead expenses are part and parcel of the cost of
bringing the foreign AMSs to market in this country, and, as noted by the Authority,
Section 6 does not provide for the winnowing of domestic overhead costs from the
purchase price of the foreign AMSs that the lower courts embraced. See Authority’s Br.
at 22-23 (“There is nothing within the [Steel] Act that allows amounts paid by the supplier
to a foreign manufacturer to be included on the domestic side of the equation.”). One
cannot ignore the absence of such a mechanism. See Sivick v. State Ethics Comm’n,
238 A.3d 1250, 1264 (Pa. 2020) (“[A]lthough one is admonished to listen attentively to
what a statute says, one must also listen attentively to what it does not say.”) (cleaned
up). In short, the Commonwealth Court’s observation that “cost” embraces a “wide array
of factors” accords both with the plain language of Section 6 and with common sense, but
it is equally clear that, absent a contrary statutory mandate, the unitary price that
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encompasses those various expenses is indivisible. Consequently, the 10% deduction
of domestic overhead for the foreign AMSs lacks statutory authority.13
As for how to calculate the foreign and domestic cost percentages, Section 6 of
the Steel Act does not say. The fraction to be applied is straightforward, but the numerator
and denominator are less obvious. Two sums vie to serve as denominator. UBI and
McCrossin endorse the lower courts’ view that the denominator should be what the
Authority paid McCrossin, because the Steel Act “unquestionably puts its focus on the
public agency’s payment to the contractor.” United Blower, 2020 WL 3957316, at *11.
Hence, a denominator of $243,505. The Authority, conversely, argues that this
13 In his concurring and dissenting opinion, Justice Dougherty reasons that “domestic
overhead is an element of the ‘cost’ of foreign steel that can properly be tabulated and
deducted from the price paid and received therefor because it adds only domestic value
realized by United States steel suppliers of foreign steel products.” Concurring and
Dissenting Opinion (Dougherty, J.) at 3. Respectfully, we disagree. As explained above,
the approach favored by Justice Dougherty, and adopted by the lower courts, lacks
statutory authority. Section 6 of the Steel Act does not authorize segregating domestic
overhead from the cost of foreign AMSs. To hold otherwise would engraft a new
mechanism onto the Steel Act under the guise of interpreting it. This is impermissible.
See In re Fortieth Statewide Investigating Grand Jury, 197 A.3d 712, 721 (Pa. 2018)
(“[O]ur Court may not usurp the province of the legislature by rewriting [a statute] to add
. . . requirements that . . . do not comport with the [statute] itself . . . .”).
Furthermore, Justice Dougherty contends that “the primary reason why the hearing
officer denied the 10% reduction for value added domestically (i.e., overhead costs) was
because the invoices for the foreign steel did not include that breakdown.” Concurring
and Dissenting Opinion (Dougherty, J.) at 3. Justice Dougherty concludes that,
had the invoices from the United States suppliers to United Blower broken
out the suppliers’ charges for transportation, warehousing and the like, the
reductions would have been permitted at the first level of review because
they were properly set forth on the record. In my view, this case should not
turn on such a circumstance.
Id. at 3-4. Unpropitious as it may be, the fact that this case turns on such a circumstance
is no great anomaly. Many cases hinge upon exactly the kind of unexpected
“circumstance” that Justice Dougherty identifies here. Moreover, the 10% deduction
issue is subsumed by the larger issue this Court chose to review: whether the
Commonwealth Court properly calculated the cost of the steel products under review.
[J-35-2021] - 14
denominator creates an “opportunity for manipulation.” Authority’s Br. at 34. As the
hearing officer noted: “[I]t is most appropriate to use the cost to McCrossin, not the cost
to the Authority. Otherwise, simply by marking up the cost of the steel product more, the
contractor could create a result that would result in a determination that the product is
domestic rather than foreign.” Hr’g Officer’s Adjudication at 12. Hence, a denominator
of $239,800.
UBI and McCrossin are correct that the Steel Act focuses on the public agency’s
payment to the contractor in the context of an action to recover unauthorized payments.
See 73 P.S. § 1885(a) (“Any such payments made to any person by any public agency
which should not have been made as a result of this section shall be recoverable directly
from the contractor, subcontractor, manufacturer or supplier who did not comply with
section 4 by either such public agency or the Attorney General of Pennsylvania.”).
However, the recovery of unauthorized payments presupposes that the steel products
supplied as part of a public works project violate the requirements of the Act. Before a
public agency can recover an alleged unauthorized payment, a court first must determine
whether the products are domestic steel products as defined in Section 6.
The statutory definition of “United States steel product” is conspicuously silent on
the question of payment made by either a public agency or a contractor. Instead,
Section 6 focuses on the “cost of the articles, materials and supplies.” Id. § 1886. But
the cost to whom? Given that “cost” means the price paid to acquire something, this
language suggests that the correct denominator is the price paid by UBI to acquire all of
the AMSs that went into the finished blowers, not the price paid by either the Authority or
McCrossin for those blowers.14 It was UBI that manufactured the blowers and, in doing
14 In his concurring and dissenting opinion, Chief Justice Baer reasons that
“[u]tilization of only the cost of the components paid by UBI to its suppliers as the
denominator of the Section 1886 fraction fails to account for the cost of the fully
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so, sourced all of the foreign and domestic AMSs required for the build. Pursuant to
Section 6, 75% of the cost of those AMSs must come from AMSs that were mined,
produced, or manufactured in the United States. As the entity that manufactured the
finished blowers, UBI is best-positioned to identify the various AMSs used, substantiate
their cost with invoices, and confirm whether they are domestic or foreign in origin.
Furthermore, as noted at the outset of this discussion, the Steel Act itself directs
this Court to construe Section 6 liberally in service of protecting the domestic steel
industry. See id. § 1887. This mandate supports our adoption of the total cost of all the
AMSs as the denominator, rather than the price paid by either the Authority or McCrossin.
This approach reduces the risk that the purchase price will conceal the true foreign steel
content in a steel product.15 Cutting off one avenue by which to subvert the remedial
manufactured product ‘used or supplied in the performance of the contract,’ as required
by Section 1884.” Concurring and Dissenting Opinion (Baer, C.J.) at 3. Instead, Chief
Justice Baer would use the amount charged by UBI to McCrossin for the finished blowers
as the denominator. Id. Respectfully, we must reject Chief Justice Baer’s assertion. It
is true enough that Section 4 of the Steel Act references those steel products “used or
supplied in the performance of the [public works] contract.” 73 P.S. § 1884(a). However,
Section 4 goes on to state that only the use of those steel products “as herein defined
shall be used or supplied in the performance of the contract.” Id. The definition of a
conforming steel product under the Act is found in Section 6, not Section 4. There, the
Act provides that, “[i]f 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
. . . in the United States.” Id. § 1886. Notwithstanding Chief Justice Baer’s claims to the
contrary, the definition of a United States steel product in Section 6 does not center upon
the cost of the finished steel product. Rather, the plain language of Section 6 focuses
upon the cost of the AMSs that make up the finished steel product and whether those
AMSs were mined, produced, or manufactured in this country or abroad. Accordingly,
the correct denominator is not the amount paid for the finished blowers, but the amount
paid by UBI to acquire all of the AMSs required for the build.
15 For example, imagine that a steel product retails for $1,000, but the AMSs that
make up the product cost $500 to procure. In determining whether the product is a
domestic steel product under the Steel Act, the retail price ($1,000) is irrelevant; only the
cost of the AMSs matters ($500). If 75% of that total cost is attributable to AMSs that
were mined, produced, or manufactured in the United States ($375), the product is a
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intent of the Steel Act promotes greater use of domestic steel in accordance with the Act’s
protectionist16 goals.
Finally, if the denominator is the total cost of all the AMSs, including both foreign
and domestic AMSs, then the choice of numerator is either the total cost to acquire just
the foreign AMSs or the total cost to acquire just the domestic AMSs. Either sum as
numerator will produce a workable percentage. If using the former, a resulting percentage
of less than 25% is needed to comply with the Steel Act. If using the latter, 75% or more
is needed to comply with the Act.
For the foregoing reasons, the Commonwealth Court erred in calculating the cost
of the blowers under review. Accordingly, we reverse the Commonwealth Court’s order,
and we remand for further proceedings consistent with this opinion.
Justices Saylor, Todd, Donohue and Mundy join the opinion.
Chief Justice Baer files a concurring and dissenting opinion.
Justice Dougherty files a concurring and dissenting opinion.
domestic steel product. With the total cost of the AMSs ($500) as the denominator, the
product can contain $125 worth of foreign AMSs and pass muster. However, with the
retail price ($1,000) as the denominator, the product could contain $250 worth of foreign
AMSs and not violate the Steel Act. Thus, the price paid by a public agency or contractor
for a finished steel product skews the cost percentages of the foreign and domestic AMSs,
allowing greater amounts of foreign steel into public works projects.
16 See supra note 2.
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