By Simon Lester in Non-Discrimination Standards, IEL in Domestic Courts — 12 Dec 2025

Pennsylvania Court Finds Mexican Government Guilty of "Discrimination" Due To Its Subsidies

I'm always interested in how various courts apply the concept of "discrimination" in the context of international trade, so I've been eagerly awaiting a Pennsylvania court decision in a case against Mexico. In October 2024, Zekelman, a steel pipe and tube manufacturer, announced that "a Petition for Determination of Discrimination was filed in the Commonwealth Court of Pennsylvania stating that Mexico is discriminating against steel conduit made in Pennsylvania and violating the Pennsylvania Trade Practices Act (PTPA)." The PTPA, it said, "was implemented in 1968 to protect steel and aluminum products made in Pennsylvania and made it unlawful for any public agency to specify, purchase, or permit to be furnished or used, in any public works, aluminum or steel products made in a foreign country which has been determined as discriminating by the Court." Wheatland Tube, LLC, a subsidiary of Zekelman Industries, Inc., is the petitioner in the case.

The discrimination statute

The Pennsylvania court's opinion explains that "Wheatland Tube, LLC (Petitioner) has filed a Petition for Determination of Discrimination (Petition) against the foreign country of Mexico under the Public Works Procurement Equalizing Trade Practices Law (Act), Act of July 23, 1968, P.L. 686, as amended, 71 P.S. § 773.101-.113." The act makes it unlawful "for any public agency to specify, purchase, or permit to be furnished or used, in any public works, aluminum or steel products made in a foreign country which has been determined as discriminating by the Court." The Act identifies a broad set of possible claimants:

Section 6. (a) Any public agency, importer, or taxpayer of this Commonwealth may file a petition with the Court specifically setting forth alleged discrimination, as herein defined, by a foreign country and praying for a determination thereof. ...

And here's the definition of "discriminates" as set out in the Act:

Section 2. As used in this act:

(1) The word "discriminates" means any act, regulation, or policy of a foreign country which, directly or indirectly

(i) prevents the importation, sale or use of any supplies, materials or equipment manufactured in this Commonwealth;
(ii) grants or bestows a preference, discount or other competitive advantage to supplies, materials or equipment manufactured in the foreign country, the effect whereof is to place similar supplies, materials or equipment manufactured in this Commonwealth at a competitive disadvantage;
(iii) restricts the opportunities for persons having a business situs in this Commonwealth to bid on or compete for government contracts, including but not limited to a preference for residents of the foreign country;
(iv) solicits for, awards or negotiates public works contracts on a selective tender basis;
(v) imposes discriminatory duties, tariffs, or border taxes on the importation of supplies, materials, or equipment not produced in the foreign country, the effect whereof is to place supplies, materials, or equipment manufactured in this Commonwealth at a competitive disadvantage with like goods manufactured in any foreign country;
(vi) adopts or condones any other unfair method of competition in international trade, including but not limited to, the exportation of aluminum or steel products made in the foreign country through cartels or the subsidization of said products.

Let me first note that I'm very curious about the circumstances under which this legislation was enacted. In 1968, I'm guessing that steel and aluminum imports from Europe and Japan were the main issue, but I'd love to hear more about: (1) what exactly was happening at the time in these sectors, (2) what the debate in the Pennsylvania legislature was like, and (3) whether other states passed similar legislation. If there are any students out there looking for paper topics, this might be a good one!

Turning to the substance of the statute, this is a broader conception of discrimination than I was expecting when I first heard about the case. It covers not just the kinds of discrimination that are the usual subject of GATT/WTO non-discrimination disputes, but also a group of what might be called "unfair trade practices." Summing up the various items set out in the statute, the following measures are covered:

import bans, duties, and border taxes;
discriminatory regulations;
discriminatory government procurement;
unfair trade resulting from cartels or subsidies.

The court's ruling

In the Wheatland Tube case, the court heard testimony from Jeffrey Ferry, Chief Economist at the Coalition for a Prosperous America (CPA). As CPA explains, it represents "exclusively domestic producers across many sectors and industries of the U.S. economy." It also heard the testimony of Jim Hays, President of Wheatland Tube. So, the domestic industry was well-represented.

For whatever reason, however, the Mexican government decided not to "appear or present testimony at the December 4, 2024 hearing after being served pursuant to the Act," which is a shame because I think the court could have benefitted from hearing some counter-arguments.

Based on the testimony presented, the court made the following findings of fact.

First, it said that "[m]any Mexican steel products are the same or substantially similar to steel products manufactured in the Commonwealth of Pennsylvania." It further noted that "[s]teel in Mexico is exported to U.S. and to the Commonwealth of Pennsylvania," and "[t]he steel products manufactured in Mexico and exported for use within the Commonwealth are the same or substantially similar to steel products used in public works projects in their finished or unfinished conditions within the Commonwealth of Pennsylvania." In WTO law terms, this is the "like product" or "directly competitive or substitutable" element.

Next, it concluded that Mexico had engaged in unfair competition, on the following basis:

15. The U.S. Department of Commerce has determined that Mexico has conferred certain benefits to manufacturers of steel products within Mexico, including, among other things, through Bancomext Loans and the “Eighth Rule” Permit Program.

16. Mexico further benefits and/or subsidizes its steel industry by subsidizing energy, engaging in unfair transshipment schemes, and permitting misclassification of steel conduit.

17. The benefits conferred by Mexico to manufacturers of steel within Mexico pertain to the following steel products: steel conduit.

18. The U.S. Department of Commerce has determined that the benefits conferred by Mexico, pertaining to the products mentioned in the above Findings of Fact, constitute subsidization by Mexico of said products and the manufacturing thereof.

The court then came to the following conclusions of law on the issue of discrimination:

4. The acts, statutes, regulations, policies, procedures, and practices of foreign country Mexico, as set forth above in the Findings of Fact, have the practical discriminatory effect of placing steel products manufactured in the Commonwealth of Pennsylvania at a competitive disadvantage.

5. The acts, statutes, regulations, policies, procedures, and practices of foreign country Mexico, as set forth above in the Findings of Fact, have the practical effect of granting and/or bestowing a preference, discount, or other competitive advantage to steel products manufactured in Mexico, the effect thereof discriminates against the same or substantially similar steel products manufactured in the Commonwealth of Pennsylvania, and furthermore places said products manufactured in the Commonwealth of Pennsylvania at a competitive disadvantage.

6. The acts, statutes, regulations, policies, procedures, and practices of foreign country Mexico, as set forth above in the Findings of Fact, have the practical effect of discriminating against steel products manufactured in the Commonwealth of Pennsylvania by the adoption and/or condoning of unfair methods of competition in international trade.

7. The acts, statutes, regulations, policies, procedures, and practices of foreign country Mexico, as set forth above in the Findings of Fact, have the practical effect of discriminating against steel products manufactured in the Commonwealth of Pennsylvania by the subsidization of steel products and the manufacturing thereof by Mexico.

8. The acts, statutes, regulations, policies, procedures, and practices of foreign country Mexico, as set forth above in the Findings of Fact, do in fact discriminate against steel products manufactured in the Commonwealth of Pennsylvania.

On this basis, the court granted the petition and entered the following Order:

1. The Court finds that the foreign country of Mexico discriminates against certain steel products manufactured in the Commonwealth of Pennsylvania.

2. Pursuant to Section 8 of the Act, 71 P.S. § 773.108, the Prothonotary of this Court shall place on the Foreign Registry Docket the name of Mexico and the specific products the purchase or use of which by and for public agencies is prohibited by the Act: steel conduit.

3. It shall be unlawful for any public agency to specify, purchase, or permit to be furnished or used, in any public works, steel products made in Mexico which have been determined by this Court to discriminate pursuant to the Act, namely, steel conduit; or for any person, in the performance of that person’s public works contract, subcontract or purchase order to furnish steel conduit made in Mexico.

Some questions and comments on the ruling

A practical question I have is, how much steel conduit was Mexico selling to Pennsylvania agencies? Will this ruling have much of an impact on actual trade flows?

On the legal issues, the court focused on a particular category of discrimination in the statute: Subsidies to products in the foreign country. If I'm reading the opinion correctly, the existence of those subsidies was enough to find that there was a discriminatory effect on U.S. competitors, and therefore discrimination exists. Interestingly, intent did not seem to play a role here. Could there be a way to work it in somehow under the statute? If Mexico had put forward a non-discriminatory intent, what would the court have done with it?

It's also worth noting the contrast between the role of subsidies in this discrimination analysis and the approach to subsidies under the GATT. In GATT Article III, subsidies leading to national treatment-style discrimination are carved out to some extent by Article III:8(b), and the GATT/WTO has a separate regime for dealing with subsidies.

Speaking of the GATT/WTO, is the court's ruling consistent with WTO obligations? We're talking about government procurement here, so the key question would be what commitments the U.S. made under the GPA. (The same issue arises under the USMCA).

A final question that occurs to me is, what are the broader implications of having domestic laws that treat foreign subsidies as discriminatory in their effect on competition with domestic industries, and provide this sort of remedy? If the practice were to spread to other countries, it could have a big impact on various U.S. products, including agriculture.

The one prior case

In a footnote, the court observed that "this is only the second case of this type filed in the Court – the first was Lucchino v. Foreign Countries of Brazil, S. Korea, Spain, Mexico and Argentina, 476 A.2d 1369, 1371 (Pa. Cmwlth. 1984)." If I'm reading this federal district court decision correctly, the Lucchino case proceeded as follows. On January 4, 1984, petitioner Frank J. Lucchino, Controller of Allegheny County, "filed in the Pennsylvania Commonwealth Court a petition for determination of discrimination under the Pennsylvania Trade Practices Act, Pa. Stat. Ann. tit. 71, §§ 773.101 – 773.113."

Mexico, "the only respondent to appear before the commonwealth court," claimed that "the court lacked jurisdiction over it because of the protection afforded by both the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1391(f), 1441(d) & 1602-1611, and the Act of State Doctrine." (So Mexico did participate in a case of this type back in 1984!)

On April 17, 1984, "the commonwealth court rejected Mexico's contentions, found respondent nations to be discriminating against Pennsylvania aluminum and steel products, and ordered the prothonotary of the commonwealth court to place on the foreign registry docket the name of the respondent countries and the specific products of each country whose purchase would be forbidden." Mexico then petitioned "to remove the matter to the federal court pursuant to section 6 of the Foreign Sovereign Immunities Act."

The federal court considered the motion of Lucchino "to remand the matter to the commonwealth court" and the motion of Mexico "to dismiss for insufficiency of service," and then made the following findings:

1. Plaintiff's motion to remand is denied.

2. Mexico's motion to dismiss for lack of personal jurisdiction due to insufficient service of process is hereby granted. However, this order of dismissal is stayed 20 days to allow plaintiff to make proper service. If proof of proper service is filed with the Clerk within 20 days after entry of this order, the action will proceed.

3. The commonwealth court's order of April 17, 1984, as it pertains to Mexico, is hereby vacated.

I don't know what happened after that, but no doubt the students who took up my suggestion to write a paper on this will figure it out!