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McCARTHY TÉTRAULT. Canadian Anti-dumping and Countervail: How Chinese Companies Can Protect Themselves Simon V. Potter spotter@mccarthy.ca John Greenwald john.greenwald@wilmerhale.com. China-Canada Trade.

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mccarthy t trault
McCARTHYTÉTRAULT

Canadian Anti-dumping and Countervail: How Chinese Companies Can Protect Themselves

Simon V. Potter spotter@mccarthy.ca

John Greenwald john.greenwald@wilmerhale.com

china canada trade
China-Canada Trade

Source: Roy, Francine, “Canada’s Trade with China” (June 2004) Statistics Canada No. 11-624-MIE No. 007, p. 5.

future issues
Future Issues
  • Increased market penetration by China leading to increased concern by domestic producers
  • Likely increased use of anti-dumping and countervailing duties (so far only 2 Canadian CVD cases against China)
  • Possible increased use of safeguards
  • Increased use by China of WTO mechanisms
  • Increased exposure of China to WTO complaints
overview of trade remedies
Overview of Trade Remedies
  • Anti-dumping
  • Anti-subsidy (countervail)
  • Safeguards
key concepts in anti dumping and countervail
Key Concepts in Anti-Dumping and Countervail
  • Occurrence of dumping/subsidization
  • Injury to Canadian industry
  • Dumping/subsidization has caused or threatens to cause material injury to a domestic industry, or material retardation of the establishment of a domestic industry
definition of dumping
Definition of Dumping
  • Goods are “dumped” when they have been sold into Canada at prices below the exporter’s home market selling price or below the exporter’s cost of production plus an amount for profit[s.2 (1) Special Import Measures Act (SIMA)]
  • Apply duty equal to margin of dumping
definition of subsidization
Definition of Subsidization
  • “[A] financial contribution by a government of a country other than Canada . . . that confers a benefit to persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods”, including domestic price supports

[s. 2(1) SIMA]

  • Financial contribution includes direct transfer of funds, foregoing of amounts due to government, provision (by government or on its direction) of goods and services other than general infrastructure

[s. 2(1.6) SIMA, mirror of Article 1.1 of SCM Agreement: both lists are exhaustive]

  • Excludes exemptions from or remissions of taxes and duties applicable to goods sold domestically
  • Benefit (discussed later) to recipient is measure of subsidy [mirror of Article 14 of SCM]
  • Apply duty equal to, no greater than, margin of subsidization

[s. 7(2) SIMA]

types of subsidies
Types of Subsidies
  • There are 3 types of subsidies under the Special Import Measures Act:
    • Non-Actionable
          • Non-specific subsidy (prohibited subsidies are deemed specific)
          • Subsidy related to research and development, disadvantaged regions or environmental standards

[s. 2(1) SIMA]

          • Pursuant to Article 31 of the SCM Agreement, Part IV, dealing with non-actionable subsidies related to research and development, environmental protection and regional development, expired on December 31, 1999.
          • The Non-actionable subsidies clause in s. 2(1) SIMA Act has been suspended by an Order issued under s.98 of SIMA.
          • Conclusion: SIMA no longer has category of non-actionable subsidies, but Canada is open to discussing revival of this category.
    • Actionable
          • Specific subsidy (complainant must prove specificity)
    • Prohibited
          • An export subsidy, or
          • A subsidy or portion of a subsidy that is contingent, in whole or in part, on the use of goods produced in, or originating from, that country of export

[s. 2(1) SIMA]

applicable laws and regulations
Applicable Laws and Regulations
  • Canada was the first country with an anti-dumping regime (since 1904)
  • Current Legislation:
    • Special Import Measures Act, R.S. 1985, c. S-15 (SIMA)
    • Special Import Measures Regulations, SOR/84-927
agency roles and coordination
Agency Roles and Coordination
  • Canada Border Services Agency (CBSA) http://www.cbsa-asfc.gc.ca/menu-e.html
    • Responsible for dumping/subsidization investigation
  • Canadian International Trade Tribunal (CITT) http://www.citt.gc.ca
    • Responsible for inquiry into injury and causation
    • Investigation and inquiry process and timeline charts (hand-out)
process for ad and cvd
Process for AD and CVD
  • Key Stages:
    • Properly documented complaint
    • CBSA initiation of investigation
    • CITT preliminary decision of injury
    • CBSA preliminary dumping/subsidy determination
    • CBSA final dumping/subsidy determination
    • CITT final decision of injury
initiating the investigation
Initiating the Investigation
  • CBSA receives a written complaint from the domestic industry (or initiate on their own or on advice from the CITT)
  • CBSA must be of the opinion that there is evidence that:
    • the goods have been dumped or subsidized; and
    • discloses a reasonable indication that the dumping or subsidizing has caused injury or retardation or is threatening to cause injury

[s. 31.1 SIMA]

standing of the complainant
Standing of the Complainant
  • Possible complainants
    • Canadian producer of like goods that are identical or similar to the competing imports
    • Association of such producers on behalf of its members
  • Support required from producers representing at least 25% of Canadian production of like goods
  • Support for complaint must exceed opposition within the Canadian industry
content of the complaint
Content of the Complaint
  • Information on:
    • Canadian-produced goods
    • Competing imports
    • Domestic industry
    • Conditions in the Canadian market
  • Evidence of:
    • Dumping or subsidizing of the imported goods
    • Resulting injury to Canadian industry
initiation of ad cvd investigation
Initiation of AD/CVD Investigation
  • CBSA decision on whether or not to initiate is based on:
    • information contained in the complaint
    • CBSA's own information
    • submissions from other parties
the investigation by the cbsa
The Investigation by the CBSA
  • In anti-dumping investigations, questionnaires are issued to:
    • identified exporters/producers from country of export, and
    • identified Canadian importers
  • In subsidy investigations, questionnaires are issued to:
    • identified exporters/producers from country of export, and
    • the Government of country of export
  • Meetings/verification visits may take place during the investigation
the investigation confidential information
The Investigation: Confidential Information
  • A party wishing to keep information or evidence confidential must provide (i) a statement designating the information as confidential, and (ii) a non-confidential edited version of the information
  • SIMA provides that information designated as confidential may be disclosed to parties’ counsel
    • Counsel must sign a confidentiality undertaking
  • CBSA may refuse to disclose where it might result in material harm to the business or affairs of the party designating the information as confidential
cbsa investigation possible results
CBSA Investigation: Possible Results
  • Termination of investigation
    • If margin of dumping or amount of subsidy is “insignificant” (s.35(1)(a)(ii) and s.2(1) SIMA) or
    • If actual and potential volume of dumped or subsidized goods is “negligible” (s.35(1)(a)(iii) and s.2(i) SIMA) or
    • If CITT concludes that evidence does not disclose a reasonable indication that the dumping or subsidization has caused or threatens injury
  • Preliminary determination of dumping/subsidization and application of provisional duties on imports of subject goods (and final CITT injury inquiry begins)
the dumping calculation
The Dumping Calculation
  • Normal value
  • Export price
  • Margin of dumping
  • Special rules
    • Sales between related parties
    • Exporters from non-market economy (normal value)

Key issue for China

dumping presumption of market economy
Dumping: Presumption of Market Economy
  • Canada used to treat China as a non-market economy in anti-dumping investigations
  • Between 1997 and 2003, China treated as a non-market economy in 9 of 10 anti-dumping cases
  • SIMA provides that Chinese industries will be considered to be operating under non-market conditions where:

(i) domestic prices are substantially determined by the government and

(ii) there is sufficient reason to believe that prices are not substantially the same as they would be if they were determined in a competitive market [s.20 SIMA]

dumping presumption of market economy continued
Dumping: Presumption of Market Economy (continued)
  • CBSA policy (June 2004):
    • Canada now presumes that the Chinese exporter is operating in a market economy unless evidence suggests otherwise
  • If Canadian complainant proves non-market conditions, normal values will be based on:
    • Price of like good sold by producers in a surrogate country, adjusted for price comparability;
    • Cost of producing and selling like goods plus a reasonable amount for profit in a surrogate country; or
    • Selling price in Canada of like goods imported from a surrogate country
dumping market economy case law
Dumping: Market Economy Case Law
  • Xanthates from the People’s Republic of China, CBSA Final Determination (February 3, 2003)
    • CBSA concluded that it was not provided with sufficient information to determine whether or not China’s Xanthates industry operated under market conditions, but
    • CBSA determined normal values on the basis of Ministerial Specification (in this case, based on cost of production and profit estimates provided by complainant)
dumping market economy case law continued
Dumping: Market Economy Case Law (continued)
  • Automotive Laminated Windshields from the People’s Republic of China, CBSA Final Determination (July 31, 2002)
    • CBSA determined that China’s automotive replacement windshield industry operates under market conditions
    • CBSA determined normal values either on the basis of selling prices in China or on the basis of the costs of producing and selling the goods in China, plus a reasonable amount for profit
dumping market economy case law continued1
Dumping: Market Economy Case Law (continued)
  • Wood Venetian Blinds and Slats, CBSA Final Determination (May 17, 2004)
    • CBSA was not provided with any complete submissions from Chinese exporters
    • CBSA determined normal values on the basis of Ministerial Specification
dumping market economy case law continued2
Dumping: Market Economy Case Law (continued)
  • Certain Fuel Tanks from the People’s Republic of China, CBSA Final Determination (August 3, 2004)
    • CBSA rejected allegations that the Chinese fuel tank industry was operating under non-market conditions
    • CBSA determined final normal values on the basis of the Chinese costs of producing and selling the goods, plus a reasonable amount for profit
dumping market economy case law continued3
Dumping: Market Economy Case Law (continued)
  • Outdoor Barbecues, CBSA Termination of Investigation (December 3, 2004)
    • CBSA concluded that it was not able to determine an amount for profits for co-operative exporters as there was no publicly available information regarding the production and sale of barbecues
    • CBSA determined normal values on the basis of Ministerial Specifications (in this case, on the basis of the cost of production and selling the goods and a reasonable amount for profits)
dumping market economy case law continued4
Dumping: Market Economy Case Law (continued)
  • Carbon Steel and Stainless Steel Fasteners, CBSA Preliminary Determination (September 10, 2004)
    • For some exporters, CBSA calculated preliminary normal values on the basis of the weighted average prices for sales to unrelated customers in China
    • For other exporters, CBSA determined preliminary normal values on the basis of the cost of producing and selling the goods in China plus a reasonable amount for profit
the subsidy calculation step 1 does a subsidy exist
The Subsidy Calculation –Step 1: Does a subsidy exist?
  • In determining whether a program has resulted in a subsidy under SIMA, the Canadian government considers whether:
  • there has been a financial contribution by a government of a country other than Canada; s. 2(1) SIMA] and
  • there was a benefit conferred to persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export or import of goods. [s. 2(1) SIMA]
  • If a subsidy is found to exist, it may be subject to countervailing duties if it is specific (prohibited subsidies are deemed specific: s. 2(7.2)(b) SIMA)
the subsidy calculation step 1 does a subsidy exist1
The Subsidy Calculation –Step 1: Does a subsidy exist?
  • (i) Financial Contribution:
  • a financial contribution exists in 4 cases where:
  • a) practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;
  • b) amounts that would otherwise be owing and due to the government are exempted or deducted; or amounts that are owing and due to the government are forgiven or not collected;
  • c) the government provides goods or services, other than general governmental infrastructure, or purchases goods; or
  • d) the government permits or directs a non-governmental body to do anything referred to in any of paragraphs (a) to (c) where the right or obligation to do the thing is normally vested in the government and the manner in which the non-governmental body does the thing does not differ in a meaningful way from the manner in which the government would do it

[s. 2(1.6) of SIMA and Part II of SIMR]

the subsidy calculation step 2 how to calculate a subsidy
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

  • Each type of specific subsidy, as classified under the SIMA regulations (SIMR), has its own formula for calculating benefits, with benchmark being fair market value or prevailing market conditions in the country of subsidization [mirror of Article 14(d) of SCM Agreement]
the subsidy calculation step 2 how to calculate a subsidy1
The Subsidy Calculation –Step 2: How to calculate a subsidy?
  • SIMR provides specific rules for benefit calculation in cases of:

a. Grantsb. Loans at preferential ratesc. Loan guaranteesd. Income tax credits, refunds and exemptionse. Deferral of income taxesf. Excessive relief of duties and taxesg. Acquisition of sharesh. Purchase of goods by governmenti. Provision of goods and Services by Government

the subsidy calculation step 2 how to calculate a subsidy2
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(a) For a subsidy classified as a Grant, or a transfer of liabilities or a forgiveness of debt:

Benefit = grant amount/volume of subsidized goods

[s. 27 of SIMA regulations]

  • Re: the Subsidizing of Certain Stainless Steel Wire Originating in or Exported from India -4258-123 AD/1292, 4218-14 CV/98, July 15, 2004

- CBSA final determination classified subsidy program asa grant and used grant formula under s. 27(1.2) of SIMR

the subsidy calculation step 2 how to calculate a subsidy3
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(b) For a subsidy classified as a Loan at a Preferential rate,CBSA will inquire as to comparable commercial loan rates and as to the total volume of subject goods for which the exporter has used the loans, and

Benefit = interest savings/applicable volume

[s. 28 of SIMR]

  • Re: the Subsidizing of Certain Stainless Steel Wire Originating in or Exported from India – 4258-123 AD/1292, 4218-14 CV/98, July 15, 2004

- CBSA final determination classified subsidy program as a loan and used loan formula under s. 28 of SIMR

the subsidy calculation step 2 how to calculate a subsidy4
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(c) For a subsidy classified as a Loan Guarantee, the CBSA will inquire as to the interest rate the exporter would have had to pay commercially in the absence of the guarantee, and as to the volume of goods for which the exporter has used the loan, and

Benefit = Interest savings/Applicable volume

The interest savings are calculated as a present-value under a hierarchy of alternative methodologies

[s.31.1 of SIMR]

the subsidy calculation step 2 how to calculate a subsidy5
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(d) For a subsidy classified as an Income Tax Credit, Refund or Exemption,if the credit refund or exemption is contingent on the export of goods,

Benefit = amount/quantity exported

[s. 32 of SIMR]

  • Re: the Subsidizing of Certain Stainless Steel Wire Originating in or Exported from India - 4258-123 AD/1292, 4218-14 CV/98, July 15, 2004

- CBSA final determination classified subsidy program as an income tax credit and used income tax credit formula under s. 32 of SIMR

the subsidy calculation step 2 how to calculate a subsidy6
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(e) For a subsidy classified as a Deferral of Income Taxes,the CBSA inquires as to the interest which would have been payable on a commercial loan to pay the undeferred tax and if the deferral is contingent on export performance,

Benefit = Present value of interest savings/amount exported

the subsidy calculation step 2 how to calculate a subsidy7
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(f) For a subsidy classified as a Excessive Relief or Remission of Duties and Taxes,

Benefit = (Relief - Duties on taxes originally paid)/Amount of applicable goods exported

[s.35 and s.35.01 of SIMR]

the subsidy calculation step 2 how to calculate a subsidy8
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(g) For a subsidy classified as a government’s Acquisition of Shares, the CBSA inquires as to whether the government paid too high a price for those shares, and

Benefit = (Price-FMV)/Volume of subsidized goods

[s. 35.1 of SIMR]

the subsidy calculation step 2 how to calculate a subsidy9
The Subsidy Calculation –Step 2: How to calculate a subsidy?

(ii) Benefit:

(h) For a subsidy classified as a Purchase of Goods by Government

Benefit = (Price – FMV)/Volume of subsidized goods

[s.35.2 of SIMR]

the subsidy calculation step 2 how to calculate a subsidy10
The Subsidy Calculation –Step 2: How to calculate a subsidy?
  • (ii) Benefit:

(i) For a subsidy classified as Goods or services provided by a government,

benefit = (FMV-price)/ volume of subsidized goods

[s. 36 of SIMR]

the subsidy calculation issue of specificity
The Subsidy Calculation: Issue of Specificity

(iii) Issue of Specificity:

  • A subsidy is specific where it is:

(i) limited to a particular enterprise or industry or group of industries within the jurisdiction of the authority granting the subsidy; or

(ii) a prohibited subsidy (i.e. its granting is contingent on export performance)

[s. 2(7.2) of SIMA]

the subsidy calculation issue of specificity1
The Subsidy Calculation: Issue of Specificity
  • Determination of Specificity by the CBSA:

Notwithstanding that a subsidy may not be limited in the manner referred to on the previous slide, the President of the CBSA may determine the subsidy to be specific having regard to whether:

  • (i) there is exclusive use of the subsidy by a limited number of enterprises;
  • (ii) there is predominant use of the subsidy by a particular group of enterprises;
  • (iii) disproportionately large amounts of the subsidy are granted to a limited number of enterprises; and
  • (iv) the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available

[s. 2(7.3) of SIMA]

the subsidy calculation issue of specificity2
The Subsidy Calculation: Issue of Specificity
  • Re Refined Sugar Originating in or Exported from the U.S., Denmark, Germany, Netherlands, U.K. and Korea and the Subsidizing of Refined Sugar Originating in or Exported from the E.U
  • Inquiry No.: NQ-95-002, November 6, 1995

-CITT finds that the subsidizing of certain sugar products originating in or exported from the European Union (a) has not caused material injury or retardation to the domestic industry; however (b) is threatening to cause material injury to the domestic industry

-calculated subsidy using ministerial discretion under s. 2(7.3) of the SIMA Act

the subsidy calculation issue of specificity3
The Subsidy Calculation: Issue of Specificity
  • Additional Considerations:
  • Where any of the factors listed in s. 2(7.3) is present, the CBSA President must consider whether its presence is due to:

(i) the extent of diversification of economic activities within the jurisdiction of the granting authority, or

(ii) the length of time that the subsidy program has been in operation

  • If the CBSA President is of the opinion that the presence of any factor is due to one of these reasons he may find the subsidy not to be specific.

[s. 2(7.4) of SIMA]

the subsidy calculation issue of specificity4
The Subsidy Calculation: Issue of Specificity
  • Non-specific subsidy:

A subsidy is not specific where the criteria or conditions governing eligibility and the amount of the subsidy are:

(i) objective;

(ii) set out in a public document; and

(iii) applied in a manner that does not favour or is not limited to a particular enterprise or group of enterprises

[s. 2(7.1) of SIMA]

the subsidy calculation general deductions from calculations
The Subsidy Calculation: General Deductions from Calculations

The Canadian government will deduct the following costs from the initial calculation of the amount of subsidy:

  • (i) the amount of any fee or other expense necessarily incurred by the recipient of the subsidy in order to obtain the subsidy;
  • (ii) the amount of any tax, duty or other charge levied by a government against the recipient of the subsidy for the purpose of offsetting the subsidy; and
  • (iii) the amount of any loss in the value of the subsidy that results from the deferred receipt of the subsidy where the deferral has been imposed by the government that granted the subsidy

[s. 26 of SIMR]

submissions
Submissions
  • Interested persons, namely producers, exporters, importers, purchasers and retailers, may make submissions throughout the investigation
  • Submissions may be made orally or in writing
  • Submissions may be confidential
verification and evidence
Verification and Evidence
  • If CBSA starts an investigation, it sends questionnaires to exporters, importers and, in subsidy investigations, the foreign government involved
  • Where sufficient information has not been provided to enable determination of the amount of the subsidy, or the regulations prescribe no methodology, the amount shall be determined in a manner specified by the Minister of National Revenue
upstream subsidies downstream effects
Upstream Subsidies, Downstream Effects

The logic of subsidy calculation was challenged, among others, in two U.S. cases:

  • In Fresh, Chilled and Frozen Pork from Canada, No. DS7/R – 38S/30, the U.S. DOC had to calculate how much of the upstream subsidy given to Canadian pig farmers (i.e. for feed and transportation) found its way downstream into the pork meat reaching the U.S.
  • In Re Certain Softwood Lumber from Canada, No. WT/DS257/AB/R (January 19, 2004), the U.S. DOC had to calculate how much of the upstream subsidy given to tree harvesters found its way into exported lumber (including for example, bed frames)
  • Both cases involved:
    • The calculation of subsidy effects going into downstream products which are not subject goods or not exported
    • Debate as to dilution of the downstream effect as the subsidized product enters markets where competitive prices are unaffected by the subsidy. In Softwood (par.143), the WTO held that the DOC had to perform a “pass-through analysis” and not presume that upstream subsidies to the production of an input also bestow a benefit, downstream, to the unrelated producer of output.
upstream subsidies downstream effects continued
Upstream Subsidies, Downstream Effects (Continued)
  • Upstream subsidies are contemplated by Articles 10, 13 of the SCM Agreement andArticle VI (3) of the GATT 1994
  • S. 2(1) SIMA Act refers to subsidies paid “indirectly”
  • To date, no Canadian subsidy case has yet dealt with the issue of upstream subsidies
  • However, Canada’s submissions in the Softwood Lumber case reveal Canada’s commitment to its WTO obligations with respect to the calculation of subsidies by insisting on an upstream subsidy analysis with respect to indirectly subsidized goods
negligibility
Negligibility
  • If the CITT or CBSA determines that the volume of dumped or subsidized goods from a country is negligible, the Tribunal terminates its inquiry in respect of those goods
negligibility continued
Negligibility (Continued)
  • The volume of goods dumped by a country is “negligible” if:
    • It is less than 3% of the total volume of imports into Canada from all countries of goods of the same description
  • Unless:
    • Three or more countries, each exporting less than 3%, together exceed 7% of the total volume of imports into Canada of goods of the same description. (For developing countries, the SMC Agreement sets these thresholds at 4% and 9% and the SIMA directs the CBSA to take this into account).
insignificance
Insignificance
  • The amount of the subsidy must not be “insignificant”
    • An insignificant subsidy amount is less than 1% of the export price of the goods [s. 2 SIMA]
  • However, the threshold insignificance level for developing countries is 2%
    • Any investigation involving a developing country will likely be terminated if the total amount of subsidy for that country does not exceed 2% of the value of the goods

[s. 41.2 SIMA, referring to paras. 10 & 11, Article 27 SCM Agreement]

    • China is a developing country for purposes of Article 27

[Source: DAC OECD classified China as a middle-income developing country. Date: 01/01/03]

determination of injury
Determination of Injury
  • Has the domestic industry suffered material injury or retardation? Factors of injury set out at s. 37.1 and 37.2 of SIMR. Examples:
    • Lost sales or market share
    • Price suppression or erosion
    • Financial conditions: profitability, cost recovery and so on
    • Is injury being threatened?
      • “circumstances in which the dumping or subsidizing of goods would cause injury are clearly foreseen and imminent”
determination of injury1
Determination of Injury
  • If the CITT finds that the dumping/ subsidization caused or threatens injury, duties will be imposed for a five-year period [s.42 of SIMA]
  • CITT conducts extensive hearing following extensive questionnaires
  • Subject to expiry review after five years
determination of causation
Determination of Causation
  • Causation issues: non-dumping/non-subsidization factors
    • Product quality and consumer preference
    • Poor business decisions
    • Economic conditions or other external factors, including competitive factors
    • Non-subject goods causing injury
  • Cumulation
    • Injury need not be found to have been caused or threatened by imports from each country concerned
    • CITT will “cumulate” unless conditions of competition make that inappropriate [s. 42(3)(4) of SIMA]
public interest inquiry
Public Interest Inquiry
  • An inquiry may be initiated on request of an interested personto review public interest considerations related to the imposition of a duty resulting from a CITT injury inquiry

[s. 45 SIMA]

  • CITT makes recommendations to the Minister of Finance
  • With Cabinet approval, the Minister may reduce the CVD through an Order in Council

[s. 14, 45 SIMA]

public interest inquiry1
Public Interest Inquiry
  • Public Interest concerns include:
    • A CVD imposing a burden on Canadian competitors
    • A CVD affecting availability of supply
  • Re Certain Baby Food Public Interest Inquiry, No. PB-98-001 – report issued by CITT recommending reducing anti-dumping duty by two-thirds
judicial review do the determinations respect canadian law
Judicial Review: do the determinations respect Canadian law?
  • Determinations of the CBSA and of the CITT are subject to judicial review by the Federal Court of Appeal if the Court is satisfied that the agency:
  • (a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
  • (b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
  • (c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
  • (d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
  • (e) acted, or failed to act, by reason of fraud or perjured evidence; or
  • (f) acted in any other way that was contrary to law.

[s. 96.1 of SIMA & s. 18.1(4) of the Federal Court Act]

wto dispute settlement are the determinations consistent with the wto agreements
WTO Dispute Settlement: are the determinations consistent with the WTO Agreements?
  • Canada’s laws and regulations, and the practices and determinations of the CBSA and CITT can be challenged before a Dispute Settlement Panel and the appellate Body of the WTO.
  • If Canada loses the WTO case, the Minister of Finance may refer the matter back to the agency for a re-determination in accordance with the WTO ruling [s. 76.1(1) of SIMA]
  • It is most unlikely the Minister of Finance would decide otherwise
  • The agency may reopen its record as it sees fit [s. 76.1(1)(b) of SIMA]
like goods
Like Goods
  • SIMA s.2(1): “like goods” are goods which are identical or, if there are not identical goods, goods the uses and characteristics of which “closely resemble” the others.
  • Physical characteristics, for example:
    • Appearance, design or fashion
    • Specifications, dimensions
    • Taste
    • Shape, colour or lustre
    • Chemical composition
    • Input materials
    • Manufacturing/production process and equipment
like product continued
Like Product (Continued)
  • Market characteristics, for example:
    • End use
    • Substitutability/competition
    • Complementarity
    • Marketing methods
    • Consumer preferences
    • Pricing
administrative changes after positive determinations
Administrative Changes after Positive Determinations

There are mechanisms for anti-dumping and countervailing duty rates to change administratively, up or down, during the five-year interval following determination and prior to the sunset reviews.

For instance it is possible to:

  • obtain a normal value for a model not covered in the original determination; or
  • change the countervailing duty rate if the subsidizing program changes; or even
  • Persuade the CITT to conduct an interim review hearing and conclude that there is no longer any threat of injury (for all or some of the subject goods).
expiry reviews initiation
Expiry Reviews: Initiation
  • AD and CVD determinations expire after 5 years unless they are renewed by the CITT
  • The CITT will not renew without first issuing a notice of expiry, conducting a review hearing and deciding that there is a likelihood of resumption of injury.

[s.76.03 of SIMA]

expiry reviews critical elements
Expiry Reviews: Critical Elements
  • CITT decides whether to conduct an expiry review
  • CBSA determines whether it is likely that the exporters will resume or continue dumping or subsidizing the subject goods

[s.37.2(1) of SIMR]

  • CITT determines whether such resumed or continued dumping or subsidizing is likely to cause injury or retardation to the domestic industry

[s.37.2(2) of SIMR]

general overview of canada s countervail history
General Overview of Canada’s Countervail History
  • 21 cases involving subsidy investigations under SIMA since its implementation on December 1, 1984
    • to date, 11 cases successful – subsidization and injury findings
    • compare with approximately 140 dumping investigations
  • Countries most often targeted under Canadian CVD actions:
    • Brazil
    • India
    • EU countries
general overview of canada s countervail history continued
General Overview of Canada’s Countervail History (continued)
  • Products most often targeted under Canadian CVD actions:
    • agricultural and food products (grain corn, boneless beef, pasta, refined sugar)
    • steel products
recent cvd cases in canada
Recent CVD Cases in Canada
  • Re: the Subsidizing of Certain Stainless Steel Wire Originating in or Exported from India, Final CBSA Determination (June 30, 2004)
    • operation of duty drawback scheme
    • income tax exemption in export profits
    • duty relief on importation of certain capital goods
    • favourable interest rate on loan pertaining to goods for export
  • CITT issued final injury determination (July 30, 2004)
recent cvd cases in canada imports from china
Recent CVD Cases in Canada: Imports from China
  • Canada’s first subsidy cases against China were initiated in 2004
  • Re: Outdoor Barbeques(AD and CVD)
    • self-standing barbeques for outdoor use, consisting of metal lid, base and frame, fuelled by either propane or natural gas, with primary cooking space between 200 and 550 sq.in. (approximately 1290 and 3549 sq.cm.), in assembled or knocked-down condition
    • February 19, 2004 – Fiesta Barbeques Limited’s complaint filed
    • April 13, 2004 – CBSA investigation initiated
recent cvd cases in canada imports from china continued
Recent CVD Cases in Canada: Imports from China (continued)
  • Re: Outdoor Barbeques (continued)
    • June 11, 2004 – CITT preliminary injury determination issued
    • June 25, 2004 – CBSA’s dumping and subsidy investigation extended
    • August 27, 2004 – CBSA preliminary determination of subsidization issued, provisional duties imposed
recent cvd cases in canada imports from china continued1
Recent CVD Cases in Canada: Imports from China (continued)
  • Re: Outdoor Barbeques (continued)
  • November 19, 2004 – CBSA terminated the CVD investigation
    • amount of subsidy (1.7%) insignificant (China considered developing country under Article 27)
    • no additional benefits for establishing operations in special economic zones
    • no exporter eligible for grants for export performance or employment of workers
    • no exporter received any loan guarantee
    • no exporter qualified for income tax credits, refunds or exemptions
    • no exporter benefited from excess refund of duties or taxes
    • no exporter received financial benefit when obtaining land use rights
recent cvd cases in canada imports from china continued2
Recent CVD Cases in Canada: Imports from China (continued)
  • Re: Carbon Steel and Stainless Steel Fasteners (AD and CVD)
    • carbon steel and stainless steel fasteners, i.e., screws, nuts and bolts of carbon steel or stainless steel that are used to mechanically join two or more elements, excluding fasteners specifically designed for application in the automotive or aerospace industry
    • March 24, 2004 – Leland Industries Inc.’s complaint filed
    • April 28, 2004 – CBSA investigation initiated
    • June 25, 2004 – Starpipe’s low alloy steel product excluded, at request of Brenda Swick, on the basis that were not like goods
recent cvd cases in canada imports from china continued3
Recent CVD Cases in Canada: Imports from China (continued)
  • Re: Carbon Steel and Stainless Steel Fasteners (continued)
    • June 28, 2004 – CITT preliminary injury determination issued
    • July 9, 2004 – CBSA dumping and subsidy investigation extended
    • September 10, 2004 – CBSA preliminary determination of subsidization, provisional duties imposed
recent cvd cases in canada imports from china continued4
Recent CVD Cases in Canada: Imports from China (continued)
  • Programs and incentives under investigation by CBSA in Steel Fasteners case:
    • special economic zone incentives
    • grants provided for export performance and employing common workers
    • preferential loans
    • loan guarantees by the Government of China
    • income tax credits, refunds and exemptions
    • relief from duties and taxes on inputs
    • reductions in land use fees
    • purchase of goods from state-owned enterprises
recent cvd cases in canada imports from china continued5
Recent CVD Cases in Canada: Imports from China (continued)
  • Re: Laminate Flooring (AD and CVD)
    • laminate flooring in thickness ranging from 5.5 mm to 13 mm (other than laminate hardwood flooring where the hardwood component exceeds 2 mm in thickness)
    • August 13, 2004 – Uniboard Surfaces Inc.’s complaint filed
    • October 4, 2004 – CBSA investigation initiated
recent cvd cases in canada imports from china continued6
Recent CVD Cases in Canada: Imports from China (continued)
  • Re: Laminate Flooring (continued)
    • December 3, 2004 – CITT preliminary injury determination issued
    • January 4, 2005 – CBSA preliminary determination of dumping and/or subsidization expected
general overview of canada s anti dumping history
General Overview of Canada’s Anti-dumping History
  • Over 100 cases involving anti-dumping investigations under SIMA
  • Often overlap with countervail investigation
  • Many countries targeted including:
    • United States
    • EU countries
recent ad cases in canada imports from china
Recent AD Cases in Canada: Imports from China
  • Re: Wood Venetian Blinds and Slats
    • wood venetian blinds and slats
    • October 8, 2003 – Stores de Bois de Montréal Inc.’s complaint filed
    • November 21, 2003 – CCRA investigation initiated
    • January 20, 2004 – CITT preliminary injury determination issued
    • February 19, 2004 – CBSA preliminary determination of dumping issued
recent ad cases in canada imports from china continued
Recent AD Cases in Canada: Imports from China(continued)
  • Re: Wood Venetian Blinds and Slats (continued)
    • May 17, 2004 – CBSA final determination of dumping issued
    • June 18, 2004 – CITT negative injury and threat of injury finding with respect to venetian blinds
    • June 18, 2004 - CITT final injury determination issued with respect to wood slats
recent ad cases in canada imports from china continued1
Recent AD Cases in Canada: Imports from China (continued)
  • Certain Fuel Tanks from the People’s Republic of China
    • new fuel tanks, gasoline or diesel, for passenger cars and light trucks, for the replacement market
    • October 13, 2003 – Spectra Premium Industries Inc.’s complaint filed
    • December 19, 2003 – CBSA investigation initiated
    • February 17, 2004 – CITT preliminary injury determination issued
recent ad cases in canada imports from china continued2
Recent AD Cases in Canada: Imports from China (continued)
  • Certain Fuel Tanks from the People’s Republic of China (continued)
    • March 16, 2004 – CBSA’s dumping investigation extended
    • May 3, 2004 – CBSA preliminary determination of dumping issued
    • August 3, 2004 – CBSA final determination of dumping issued
recent ad cases in canada imports from china continued3
Recent AD Cases in Canada: Imports from China (continued)
  • Certain Fuel Tanks from the People’s Republic of China (continued)
    • August 31, 2004 – CITT negative injury finding
      • declining sales volume due to
        • general market contraction
        • complainant’s monopoly position and behaviour in the marketplace forced some customers to seek alternate sources of supply
recent ad cases in canada imports from china continued4
Recent AD Cases in Canada: Imports from China (continued)
  • Certain Fuel Tanks from the People’s Republic of China (continued)
    • August 31, 2004 - CITT negative threat of injury finding
      • subject goods not disruptive source of supply in the Canadian marketplace
      • insufficient inventory to significantly expand sales in Canadian market
      • other priority geographic markets
      • import prices increasing
recent ad cases in canada imports from china continued5
Recent AD Cases in Canada: Imports from China (continued)
  • Re: Outdoor Barbecues (AD and CVD)
    • self-standing barbeques for outdoor use, consisting of metal lid, base and frame, fuelled by either propane or natural gas, with primary cooking space between 200 and 550 sq.in. (approximately 1290 and 3549 sq.cm.), in assembled or knocked-down condition
    • August 27, 2004 – CBSA preliminary determination of dumping issued, provisional duties imposed
    • November 19, 2004 – CBSA terminated investigation
      • margin of dumping (1.6%) insignificant
      • all provisional duties collected to be returned to importers
recent ad cases in canada imports from china continued6
Recent AD Cases in Canada: Imports from China (continued)
  • Re: Carbon Steel and Stainless Steel Fasteners (AD and CVD)
    • carbon steel and stainless steel fasteners, i.e., screws, nuts and bolts of carbon steel or stainless steel that are used to mechanically join two or more elements, excluding fasteners specifically designed for application in the automotive or aerospace industry
    • June 28, 2004 – CITT preliminary injury determination issued
    • September 10, 2004 - CBSA preliminary determination of dumping, provisional duties imposed
    • December 9, 2004 – CBSA final determination of dumping expected
recent ad cases in canada imports from china continued7
Recent AD Cases in Canada: Imports from China(continued)
  • Re: Certain Laminate Flooring (AD and CVD)
  • laminate flooring in thickness ranging from 5.5 mm to 13 mm (other than laminate hardwood flooring where the hardwood component exceeds 2 mm in thickness)
  • December 3, 2004 – CITT preliminary determination of injury
  • January 4, 2005 – CBSA preliminary determination of dumping expected
safeguard mechanism for goods from china
Safeguard Mechanism for Goods from China
  • China - specific safeguard mechanism adopted by Canada on September 30, 2002
    • China’s WTO Accession Protocol (December 11, 2001)
    • Canadian International Trade Tribunal Act
    • Customs Tariff
    • Export and Import Permits Act
  • Temporary – until December 11, 2013
  • Need not demonstrate dumping or subsidization
  • Types of inquiries:
    • Market disruption inquiry
    • Extension inquiry
    • Trade diversion inquiry
china safeguards inquiries
China Safeguards: Inquiries
  • Market disruption inquiry
    • Initiated by either Canadian government or a domestic producer of like or directly competitive goods
    • CITT considers whether Chinese goods are being imported into Canada in such increased quantities or under such conditions as to cause or threaten “market disruption”
china safeguards inquiries continued
China Safeguards: Inquiries (Continued)
  • Market disruption inquiry (continued)
      • Rapid increase in imports
      • “Significant cause” or threat of material injury
  • Market disruption extension inquiry
    • Prior to expiry of a market disruption safeguard measure, a domestic producer may seek extension
    • Are safeguard measures still necessary to prevent or remedy market disruption?
china safeguards inquiries continued1
China Safeguards: Inquiries (Continued)
  • Trade diversion inquiry
    • Initiated by either Canadian government or a domestic producer of like or directly competitive goods
    • CITT considers whether any “actions” affecting imports of Chinese goods into the market of another WTO country are causing or threatening to cause a significant diversion of trade into Canada’s domestic market
      • “Action” includes actions taken
        • by China to prevent or remedy market disruption in a WTO Member other than Canada, or
        • by a WTO Member other than Canada to withdraw concessions under the WTO Agreement or otherwise limit imports to prevent or remedy market disruption, in that Member, caused or threatened by the importation of goods from China
china safeguards remedies
China Safeguards: Remedies
  • CITT report issued to Finance Canada
  • Government of Canada may:
    • Impose fixed or variable rate surtax
    • Impose quotas
  • Imposition is not automatic
  • Period specified by the Minister of Finance
  • There have so far been no Canadian safeguard cases initiated against China
china safeguards remedies continued
China Safeguards: Remedies (continued)
  • U.S. experience – USITC recommendations:
    • pedestal actuators
    • wire hangers
    • brick drums, rotors
    • iron waterworks fittings
  • Despite USITC ITC recommendations for remedies, no U.S. action to date
  • U.S. textile safeguards
example 1 aircraft dispute
Example 1: Aircraft Dispute

Canada-Brazil Aircraft Dispute

  • 1998 - Canada requests that a WTO Panel examine Brazil's PROEX program. PROEX reduces the interest rate on financing for Brazilian aircraft by 3.8 percentage points. Canada argues that PROEX is an export subsidy. In response, Brazil challenges numerous Canadian subsidy programs, alleging them to be subsidies, too.
  • 1999 – Panel report findings:
      • PROEX is a prohibited export subsidy
      • Two Canadian subsidy programs do not comply with SCM subsidy provisions: Canada Account debt financing for regional aircraft, and Technology Partnerships Canada (TPC) assistance to regional aircraft industry.
example 1 aircraft dispute1
Example 1: Aircraft Dispute
  • 1999 – WTO Appellate Body:
    • Rejects Brazil's appeal. Confirms that Brazil must withdraw PROEX export subsidies within 90 days.
    • Confirms non-compliance of Technology Partnerships Canada (TPC) and of Canada Account with SCM provisions
  • 2000 – WTO compliance panel, confirmed by Appellate Body:
    • Brazil has not brought its Proex aircraft subsidy program into compliance with its WTO obligations
    • Canada has brought Technologies Partnerships Canada (TPC) into full compliance with SCM
  • 2000 - WTO Panel rules that Canada can apply $2.1 billion in countermeasures against Brazil
example 1 aircraft dispute2
Example 1: Aircraft Dispute
  • 2001- Canada challenges compliance of Brazil’s revised Proex
  • 2001 – Brazil challenges Canada’s matching of Brazil’s preferential financing of a sale to Air Wisconsin
  • 2001 – WTO makes fifth ruling against Proex
  • 2002 - WTO rules against Canada’s financial of sale to Air Wisconsin
  • 2002 – DSB adopts Panel report findings and recommends that Canada withdraw the subsidies found to be incompatible with Article 3.1(a) of SCM Agreement
  • December 23, 2002 – WTO authorizes $385 million in Brazilian countermeasures against Canada

Canada and Brazil have been in negotiations since then to avoid the countermeasures. See: www.dfait-maeci.gc.ca/tna-nac/Aircraft-en.asp

example 1 aircraft dispute3
Example 1: Aircraft Dispute

Legal Issues:

  • Are Canada Account and Technologies Partnerships Canada programs prohibited export subsidies under Articles 1 and 3.1(a) of the SCM Agreement?
    • Are CA and TCP programs issuing prohibited export credits, financing, loan guarantees or interest rate support?
    • Are CA and TCP ‘as such’, ‘as applied’, or ‘in respect of specific transactions’ contingent on export and thus prohibited export subsidies?
    • Do CA and TCP fall within (k) the safe haven clause of the OECD Arrangement?
example 1 aircraft dispute4
Example 1: Aircraft Dispute

Compliance Measures:

  • Measures taken by Canada to restructure TCP to comply with SCM obligations:
    • (i) TPC objectives adjusted to focus on enhancing the technological capability of Canadian industry, rather than commercialization
    • (ii) Eligible activities redefined based on WTO definitions for industrial research and pre-competitive development
example 1 aircraft dispute5
Example 1: Aircraft Dispute
  • (iii) Assessment criteria re-oriented to focus on contribution a project makes to improving technological competitiveness of a firm rather than the commercial viability of a specific product
  • (iv) Transparency enhanced: all TPC contracts explicitly document government's rationale for the investment and all related conditions
  • (v) Risk and reward sharing restructured: TPC shares both the risks and rewards of projects, with rewards to government consisting of both financial returns and economic benefits to Canada
  • Repayments no longer based on royalties tied to product sales but take different forms depending on project
example 2 softwood lumber
Example 2: Softwood Lumber
  • WTO Cases (Simon Potter and Brenda Swick involved in all of these)
    • Byrd Amendment (“Continued Dumping and Subsidy Offset Act of 2000”) authorizing distribution of AD/CVD duties to US complainants: Canada (and others) won on January 15, 2004
    • U.S. treatment of Canadian log export restraints as a subsidy to lumber: Canada won on June 29, 2001
    • Section 129(c)(1) of the U.S. Uruguay Round Agreements Act, which prohibits refunds of duty collected under determinations found to be WTO-illegal: Canada’s case was found to be premature on July 15, 2002
    • DOC’s preliminary determination of subsidization: Canada won on the issues of “benefit” and “pass-through” on September 27, 2002
    • DOC’s preliminary determination of dumping: Canada eventually dropped this case
example 2 softwood lumber continued
Example 2: Softwood Lumber (continued)
  • Final determination of dumping by DOC: Canada won on August 11, 2004
  • Final determination of subsidization by DOC: Canada won, on January 19, 2004, on the issue of whether the DOC could use U.S. stumpage rates to assess whether Canadian provincial stumpage rates reflect undistorted market rates (as well as on other issues)
  • Final determination of injury by ITC: Canada won, on March 22, 2004; the ITC’s determination could not have been rendered by an objective and unbiased authority. ITC now seeks to implement this decision by reopening its record, even though a NAFTA panel has twice refused to allow this.
  • Availability of administrative reviews for individual exporters seeking their own CVD rates: consultations ongoing since June 8, 2004
example 2 softwood lumber continued1
Example 2: Softwood Lumber (continued)
  • NAFTA judicial review cases (Simon Potter and Brenda Swick involved in all of these):
    • DOC’s final determination of subsidization: Panel remanded and DOC has reduced the CVD rate substantially
    • DOC’s final determination of dumping: Panel remanded and DOC has reduced the AD rate substantially
    • ITC’s final determination of injury: Panel has remanded the decision, saying the ITC record discloses on evidence of threat of injury
the firm
The Firm
  • Full-service firm with more than 800 lawyers in Canada, the United States, and England
  • Only Canadian law firm in the Chambers Global: The World's Leading Lawyers, "Top 10 Firms in North America"
  • Mandarin and Cantonese speaking capacity
our experience with china
Our Experience with China
  • Re: Automotive Replacement Windshields [2002] PI-2001-03 (Riyaz Dattu represented an importer in the early stages of this case)
  • Re: Outdoor Barbeques [Pending] PI-2004-01 (Riyaz Dattu represents importers/retailers of Chinese goods)
  • Re: Fasteners [Pending] PI-2004-02 (Riyaz Dattu represents importers/retailers of Chinese goods) (Brenda Swick represented Starpipe through to its exclusion as a named exporter)
  • Re: Venetian Blinds [Pending](Brenda Swick represents Yeo Long)
  • Seminars to delegations from various Chinese governments, and to MOFTEC, and to various trade associations in China
our experience with china continued
Our Experience with China (continued)
  • Memos and strategic analysis provided to the Bureau of Fair Trade regarding:
    • Canada’s treatment of China as a non-market economy in anti-dumping investigations
    • Canada’s implementation of China-specific safeguards
    • addressing subsidy allegations against China in CBSA’s fasteners investigation
  • The last case in which McCarthy Tétrault or any of its lawyers took a position adverse to any Chinese interest:
    • In 2001 McCarthy Tétrault’s client Stelco supported an anti-dumping complaint by Dofasco against several countries, including China.