The International Trade Law Review: Canada

Overview of trade remedies

Canada's main legislation for trade remedies is the Special Import Measures Act (SIMA). Canada is an active user of trade remedies with five to six trade remedies cases typically initiated every year. Canada was also one of the first countries to adopt trade remedies laws, which were implemented in 1904.2

Legal framework

SIMA reflects Canada's implementation of the World Trade Organization's (WTO) Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (ADA) and the Agreement on Subsidies and Countervailing Measures (ASCM). There are no longer any major notable differences between SIMA and the ADA and the ASCM, although many SIMA provisions apply to both anti-dumping and countervailing duties interchangeably. However, controversies remain about how Canada is administering SIMA and whether it is doing so in accordance with the WTO agreements (see Sections IV and V).

The Special Import Measures Regulations provide further detail in terms of determining dumping and countervailing duties and injury.

The Canada Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT) are jointly responsible for administering SIMA.

The CBSA's administrative process is covered in the agency's guidelines (which are informative and thorough, but do not have the force of law) and are titled the SIMA Handbook. Its decisions and statements of reasons (in English and French) are published on its website.3

The Canadian International Trade Tribunal Act (the CITT Act), the Canadian International Trade Tribunal Regulations and the Canadian International Trade Tribunal Rules provide for the functioning of the CITT, including the conduct of its investigations and hearings into injury. As is the case for the CBSA, the CITT has also published guidelines on its trade remedies processes, including the Anti-Dumping Injury Inquiries – Guide. Its decisions and statements of reasons (in English and French) are published on its website.4

In addition, safeguard measures can be imposed in the form of an import surtax under Division 4 of the Customs Tariff, or as an import quota or tariff-rate quota via import controls under the Export and Import Permits Act and pursuant to the authority of the Customs Tariff. Safeguard inquiries are usually carried out in accordance with the WTO Agreement on Safeguards and the relevant provisions in the General Agreement on Tariffs and Trade 1994 (see Section VI for a brief discussion of the recent steel products safeguard).

The Governor in Council has the authority to impose safeguards on a provisional basis and only in the form of a surtax after a report by the Minister of Finance in critical circumstances for up to 200 days, or following an inquiry by the CITT pursuant to the CITT Act. Following an inquiry by the CITT, safeguards can take the form of an import surtax, an import quota or tariff-rate quota.

Treaty framework

Canada is a trading nation that is party to a large number of free trade agreements (FTAs), including the Canada–European Union Comprehensive Economic and Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Canada–United Kingdom Trade Continuity Agreement and the Canada–Korea FTA. Canada's single-most important FTA is the Canada–United States–Mexico Agreement (CUSMA), which replaced the North American Free Trade Agreement (NAFTA).

Chapter 10 of the CUSMA, which deals with trade remedies, is nearly identical to Chapter 19 of the NAFTA. The Rules of Procedure for Article 10.12 (Annex II) govern the proceedings of a binational panel review.

In the past, the dispute settlement mechanism under Chapter 19 of the NAFTA was infrequently used, in part due to some of the procedural requirements applicable to the establishment of a panel for resolution of a specific dispute. CUSMA includes changes that permit the complaining party in a proposed dispute to choose panel members from a roster if the responding party fails to participate or fails to appear for the choosing of panel members by lot procedure. This revised provision under CUSMA could facilitate the establishment of dispute settlement panels and may increase use by the CUSMA parties in the coming years.

The other trade agreements do not deal with trade remedies in any differing or notable manner. The notable exception is the Canada–Chile FTA, which was entered into in 1997 and modernised in 2019. Article M-01 survived the 1997 changes and still prohibits the use of anti-dumping remedies between these free trade partners. Such a provision remains unique in Canadian FTAs and its trade remedy law.

Recent changes to the regime

The following summarises recent changes to and ongoing developments in Canada's trade remedy regime.

i Exporter-specific termination

Following the WTO panel report in Canada – Anti-dumping measures on imports of certain carbon steel welded pipe from the separate customs territory of Taiwan, Penghu, Kinmen and Matsu (CSWP), Canada implemented legislation allowing the CBSA to terminate its dumping and countervailing investigations against individual exporters even if countrywide margins or amounts of subsidy were not de minimis.5 This had a number of implications for the CBSA's investigations as well as the CITT's injury inquiry. For example, since the WTO ruling in CSWP, the CITT routinely does not consider the goods of an exporter with a de minimis margin or amount of subsidy to be dumped or subsidised goods for any part of its injury analysis. However, some implementation issues remain. The CBSA can no longer terminate investigations on the basis of a de minimis countrywide margin or amount but must still calculate a countrywide margin to advise the CITT of that amount for the purposes of the its cumulation decision.6 The CITT, in its injury analysis, continues to face the issue of how to treat an exporter that has a de minimis margin but a significant amount of subsidy and vice versa.

ii New CBSA powers and procedures on circumvention and scope rulings

Other amendments to SIMA have added a suite of new measures to the CBSA's jurisdiction, including the ability to conduct anti-circumvention proceedings and scope rulings. These procedures, which were previously administrative and discretionary in nature, have now been formalised with statutory recognition in Canadian legislation. The CBSA has also recently been commencing exporter-specific normal value reviews as opposed to its previous practice of conducting a (normal value) reinvestigation regarding all exporters.

iii E-registry and virtual injury hearings

In March 2020, the CITT transitioned its trade remedies process to provide virtual hearings of legal arguments. There are no confidential evidentiary portions or confidential legal arguments in trade remedy cases at this time, although in some cases witnesses have presented public testimony. Legal arguments are presented via a public videoconference. These arrangements will continue until at least September 2021.

In a related development, the CITT expanded its electronic filing in 2020 to include electronic service with virtual access to other parties' filings, including confidential information, in a system similar to that used by the United States International Trade Commission. (As always, confidential information is only available to independent counsel who have signed appropriate undertakings and taken appropriate steps to safeguard the information.) Electronic service is a very significant step for truly remote conduct of the submissions phase of hearings.

iv Particular market situation

The concept of a particular market situation (PMS) was introduced into SIMA in 2017.7 Subsequent regulatory changes were made in 2019 to enable the CBSA to disregard actual input costs of an exporter if a PMS is found to exist in the country of export. The CBSA's SIMA Handbook at page 315 describes particular market situation provisions of the SIMA as follows:

To disregard certain sales made in the domestic market, as per paragraph 16(2)(c), the President [of the CBSA] has to form the opinion that a PMS exists affecting the sales of like goods for use in the country of export, such that a proper comparison is not possible. . . . The President may form the opinion that a PMS exists, which does not permit a proper comparison with the sale of the goods to the importer in Canada, if one or more of the following factors have had a significant impact on the domestic sales of like goods in the country of export:
  • government regulations such as price floors, price ceilings, production quotas, import and export controls;
  • taxation policies;
  • government support programs (financial or otherwise);
  • the presence and activities of state-owned or state-controlled enterprises in the domestic market as suppliers or purchasers of the like goods (also including other state-owned or state-controlled enterprises such as financial institutions);
  • the acquisition of production inputs or processing services that do not reflect market-based costs because they are acquired from suppliers which are state-owned or state-controlled or that are affected by government influence or control;
  • significant volatility in economic conditions in the home market of the exporter;
  • evidence of distorted input costs;
  • any other circumstances which may or may not be the result of government intervention, in which normal market conditions or patterns of supply and demand do not prevail.

In its final decisions in January 2021 with respect to the dumping and subsidising investigations of certain decorative and other non-structural plywood originating in or exported from China, the CBSA decided that there was no particular market situation in the Chinese decorative plywood market. Specifically, the CBSA stated that:

[w]ith respect to the specific factors alleged by the complainants, the CBSA did not find that there was sufficient evidence on the administrative record that: the production costs for the manufacturing process in China are distorted; there is significant government control over the decorative plywood sector in China; and the GOC heavily subsidizes its decorative plywood sector.8

Similarly, in its recent final decisions with respect to dumping of rebar from Algeria, Egypt, Indonesia, Italy, Malaysia, Singapore and Vietnam, the CBSA did not form the opinion that a particular market situation existed in Vietnam that affects domestic sales such that they do not permit a proper comparison with sales to importers in Canada.

The CBSA's application of its particular market situation mandate is currently the subject of judicial review in the Federal Court of Appeal (FCA) in Canadian Hardwood Plywood and Veneer Association v. Attorney General of Canada9 along with other cases. A decision from the FCA regarding the above-mentioned issue is not expected until 2022 at the earliest.

Significant legal and practical developments

There have been a number of significant legal and practical developments in injury analysis in recent years. The two main developments are outlined below.

i Co-extensiveness

At the preliminary injury inquiry phase of Upholstered Domestic Seating from China and Vietnam, the CITT stated that it would conduct its preliminary injury analysis on the basis that domestically produced upholstered domestic seating (UDS), limited to the specifications listed in the product definition (essentially, motion and leather seating), were like goods in relation to the subject goods.10

However, the CITT called for submissions on this issue during its final injury inquiry, in particular whether to broaden the like goods to domestically produced goods equivalent to the goods excluded from the scope of the investigation (i.e., fabric-upholstered stationary seating). In its decision on 16 June 2021, the CITT determined that co-extensiveness should not apply in this particular case 'as the domestically produced goods that fall within the scope of the product definition are not “identical in all respects” to the subject goods'. The statement of reasons issued at the conclusion of the injury inquiry will include a detailed analysis of the CITT's determination on the related issue. This decision will have a number of implications on future trade remedies cases in Canada.

ii Cumulation and cross-cumulation

Until the WTO Appellate Body report in US – Carbon Steel (India) in late 2014, the CITT evaluated injury against goods from countries subject to dumping investigations cumulatively with goods from countries subject only to countervailing investigations (sometimes referred to as 'cross-cumulation').11 Following this case, the CITT seemed to develop a new approach to cumulation to comply with the WTO decision. This approach was to de-cumulate goods, where applicable, from countries subject to:

  1. a dumping investigation only;
  2. a countervailing investigation only; or
  3. a dumping and a countervailing investigation.

In its expiry review12 decision in Concrete Reinforcing Bar from China in October 2020, the majority of the CITT upheld and explained this practice in detail.13 Some of the majority's reasons were as follows.

The CITT decided that it could and had to look to the international agreements that are the source of Canada's international obligations, and seek context and guidance from those agreements and from the decisions that interpret the provisions of these agreements.

The CITT found that consideration of WTO panel and Appellate Body decisions is required when reviewing the context and interpretation of the WTO agreements as they impact the statutory interpretation of SIMA.

The CITT observed that the most important feature of the context provided by the ASCM and the ADA is that these are wholly separate agreements.

It added that the other agency tasked with administering trade remedies in Canada, the CBSA, conducts its anti-dumping duty and countervailing duty investigations concerning goods from different countries wholly separately, both in procedure and substance.

The CITT pointed out that an alternative solution to this approach would be for it to conduct completely separate anti-dumping and countervailing injury inquiries and reviews, which it viewed as presenting conceptual injury problems.

However, there was a dissenting opinion that favoured a return to the practice before US – Carbon Steel (India).14 The dissent mainly rested on the argument that the SIMA mandated the previous practice (i.e., did not permit WTO-mandated de-cumulation, and had not been amended in this respect since US – Carbon Steel (India)). Thus, it was not open to the CITT to implement the Appellate Body decision in the revised manner it had been doing since 2015.

It remains to be seen which view will be decisive in future decisions from the CITT.

Trade disputes

In October 2018, the government imposed provisional safeguards for 200 days on imports of heavy plate, rebar, energy tubular products, hot-rolled sheet, pre-painted steel, stainless steel wire and wire rod. This decision was made partly in response to the US government's decision to impose a 25 per cent tariff on the import of certain steel products pursuant to Section 232 of the Trade Expansion Act of 1962.

Concurrently with the imposition of provisional safeguards, the government of Canada asked the CITT to conduct an inquiry to determine if longer-term final safeguards were warranted. The CITT issued its report on 3 April 2019, finding that final safeguards were warranted only for imports of heavy plate and stainless steel wire. The CITT has since conducted several exclusion inquiries, resulting in the exclusion of several plate and wire products from safeguard duties.

The investigations initiated in 2020 produced the following results:

  1. Concrete reinforcing bar 3 from Algeria, Egypt, Indonesia, Italy, Malaysia, Singapore and Vietnam15 – the CITT found injury;
  2. Wheat gluten from Australia, Austria, Belgium, France, Germany and Lithuania16 – the CITT found injury;
  3. Decorative and other non-structural plywood from China17 – the CITT found no injury or threat of injury; and
  4. Heavy plate from Chinese Taipei and Germany18 – the CITT found injury.

Ongoing CITT cases commenced in 2020 and 2021, but not yet decided at the time of writing, are: Upholstered domestic seating from China and Vietnam;19 Grinding media from India;20 Concrete reinforcing bar 4 from Russia and Oman;21 Certain Small Power Transformers from Chinese Taipei and Austria;22 and Container Chassis from China.23

Outlook

The year 2021 is anticipated to be another busy year for trade remedies proceedings. Two cases (Certain Small Power Transformers from Chinese Taipei and Austria and Container Chassis from China) were initiated by the CBSA on 15 June 2021, but more are expected.

Consultations on changes to Canada's trade remedies system were announced in news releases related to the federal Budget 2021. No details of the consultations are available at this time.

Footnotes

1 Peter Jarosz is a counsel and Chris Scheitterlein is an associate at McMillan LLP.

5 Budget Implementation Act, 2017, No. 1, S.C. 2017, c. 20, S.C. 2017, c. 20, Section 78.

6 CITT Rules, Rule 57. Recall that Subsection 42(3) of SIMA mandates that the Tribunal can only cumulate where 'the margin of dumping or the amount of subsidy in relation to the goods from each of those countries is not insignificant'.

7 Budget Implementation Act, 2017, No. 1, S.C. 2017, c. 20, S.C. 2017, c. 20, Section 75.

9 Court file A-52-21.

10 19 February 2021, PI-2020-007 (CITT) at Para. 22. This approach was previously described by the Tribunal in Fabricated Industrial Steel Components from China, Korea and Spain (25 May 2017),
NQ-2016-004 (CITT) at Paras. 45 to 47.

11 In Canada, cross-cumulation is the term for analysing cumulative injury from goods from the same country that are concurrently subject to dumping and countervailing investigations.

12 This is the term in SIMA for reviews provided for under Article 11 of the ADA.

13 RR-2019-003 at Para. 37 et seq.

14 ibid., at Para. 92 et seq.

15 NQ-2020-004 (4 June 2021).

16 NQ-2020-003 (22 April 2021).

17 NQ-2020-002 (19 February 2021).

18 NQ-2020-001 (5 February 2021).

19 NQ-2021-002.

20 NQ-2021-001.

21 NQ-2020-005.

22 PI-2021-001.

23 PI-2021-002.

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