Canada’s Announced Support for its Steel Producers will hurt Canadian Steel Importers, Manufacturers and End-Users

Source: Trade Law
Link: Canada’s Announced Support for its Steel Producers will hurt Canadian Steel Importers, Manufacturers and End-Users

Canadian steel importers, and manufacturers and end-users who use imported steel, will be affected by the Government’s latest moves to support Canada’s steel producers because the Government’s actions promise to restrict steel imports and to increase their cost to the detriment of importers, manufacturers and end-users.

On April 3, 2019, the Canadian International Trade Tribunal (CITT) concluded its safeguard inquiry into seven steel products, finding that imports of heavy plate and stainless steel wire caused serious injury to domestic producers while concrete reinforcing bar, energy tubular products, hot-rolled steel, pre-painted steel and wire rod did not.  Based on those findings, the CITT recommended that the Minister of Finance impose safeguard measures on imports of heavy plate and stainless steel wire, but declined to make any remedy recommendation for the other products.   After considering the CITT’s recommendation, the Minister took the only action legally available to him and withdrew provisional safeguard measures on concrete reinforcing bar, energy tubular products, hot-rolled steel, pre-painted steel and wire rod and only imposed ongoing safeguard measures on heavy plate and stainless steel wire.

However, the Canadian Steel Producers’ Association (CSPA) was not happy with the CITT’s decision and came out swinging.  In the weeks leading up to the Minister’s decision, the CSPA lobbied the government to ignore the CITT’s decision and impose safeguard measures on the seven steel products considered in the CITT’s safeguard inquiry anyway.  The CSPA claimed that Canada’s steel producers had been seriously injured by imported of all these steel products and told the Minister that in light of the new reality of growing protectionism and U.S. duties on Canadian steel and aluminum, the Minister had the right to ignore the CITT and to impose surtaxes and import restrictions on all seven of the steel imports.  Thankfully, the Minister refused to follow their advice and violate Canadian law and international trade rules by imposing safeguard measures on steel imports that were found to have not seriously injured Canadian steel producers.

However, the Minister has clearly decided to take steps to support Canadian steel producers and this includes making changes to Canada’s current anti-dumping system.

First, in response to the five steel products for which no injury finding was made, the Minister announced a 30-day consultation period with industry and workers, “to determine what further protections are required.”  The Minister further committed to establishing a working group to ensure that industry and worker views are heard and acted upon without delay.

Second, the Minister has announced that, “in the coming weeks, the Government will take every legal action at its disposal to protect Canadian jobs and industry from unfair trade practices.”  These new measures will include the following:

• • Authorizing timely and targeted reviews of dumping cases to boost protection through higher duties on imported goods.
  • Introducing a more robust steel import regime to strengthen import data collection, including product quantity, type and origin information, to enhance monitoring import surges, assessing evidence of transshipment and allowing government to be more responsive to sudden changes in trading patterns.
  • Giving the Canada Border Services Agency (CBSA) greater flexibility to address price and cost distortions in foreign markets when determining whether dumping has occurred.
  • Giving the CBSA the authority to develop a framework with the industry to guide the Agency in determining when it should initiate AD/CV cases against imported goods.
  • Consulting with stakeholders on the framework for remission of surtaxes imposed on imports from the U.S. to further support the use of Canadian-made steel products.

In short, these steps will:  (i) allow the CBSA to increase AD/CV duties already in place on imported steel products; (ii) allow industry stakeholders (e.g., producers and workers) to more easily oppose remission orders granted to Canadian manufacturers; and (iii) make it easier for the CBSA to self-initiate AD/CV investigations rather than require Canadian steel producers to go through the process of preparing a properly-documented complaint to justify an AD/CV investigation.   While these programs will help Canadian steel producers, they will likely hurt Canadian steel importers and Canadian manufacturers and end-users that use steel by increasing the cost of the steel that they need.  This could have serious consequences for Canadian manufacturers who produce finished goods in Canada for sale in competition with imported finished goods.  Imported finished goods would be produced outside Canada using steel that would not be subject to the Canadian duties.  Thus, the increased cost of steel inputs to Canadian manufacturers would put them at a competitive disadvantage when competing with imported finished goods.

It is also not clear that these measures will be limited to steel; depending on how these measures are put into effect they could affect a broad range of imported products.

Nothing is in place yet, but time is running out.  Canadian importers, manufacturers and end-users should write to the Minister of Finance to request that he carefully consider the impact of higher costs on the Canadian economy overall before taking action to the detriment of importers, manufacturers and end-users that may have some benefit on Canadian steel producers.  If you are concerned with Canada’s actions to further protect the steel industry at the cost of Canadian manufacturers and end-users, please feel free to contact the author at (613) 424-3921 or by e-mail at lafortune@wl-tradelaw.com.

— Gordon LaFortune
May 10, 2019