Michael Woods was interviewed with respect to China’s recent expression of interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The article can be found at this link:

https://www.scmp.com/economy/china-economy/article/3092143/chinas-interest-trans-pacific-trade-deal-met-scepticism-those

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Canadian practice has been to consider Anti-dumping/Countervailing measures (AD/CV) measures exclusively from the perspective of the domestic industry that filed the dumping complaint and ensure that any injury to this industry is offset using AD/CV duties.  However, this approach does not necessarily take the best interests of the Canadian economy as a whole into consideration.  That practice should stop and Oil Country Tubular Goods (OCTG) is the product that calls out for this change.

The Canadian International Trade Tribunal (CITT) recently started two Expiry Reviews into AD/CV Orders against OCTG.[1]  The purpose of these Reviews is to determine whether the existing Orders should be allowed to expire or be extended for a further five years.  If extended, OCTG imported from China, Chinese Taipei, India, Indonesia, the Philippines, Korea, Thailand, Turkey, Ukraine and Vietnam will continue to be subject to AD/CV duties for a further five years, increasing their price in Canada.

The Canadian AD/CV system favours domestic producers because the only question before the CITT in an AD/CV Inquiry is injury to the domestic industry.  In an AD/CV Inquiry, the Canada Border Services Agency (CBSA) determines whether the imported goods that are the subject of an AD/CV complaint are dumped and/or subsidized and determines the margin of dumping and subsidization.  The CITT separately determines whether the imported goods have caused or threaten to cause injury to the domestic producers, but the CITT does not determine the level AD/CV duties required to offset that injury or threat of injury.  Instead, AD/CV duties are applied to imported goods based on the rates established by the CBSA.  The same thing happens in Expiry Reviews.  The amount of AD/CV duties required to offset the injury, or whether it is in Canada’s best interests to impose duties in any amount is not considered.

Since AD/CV duties are set based on the margins established by the CBSA, it is possible if not likely that the AD/CV duties applied to the imported goods will exceed the amounts actually required to offset the injury or threat of injury found.  In this case, the domestic producers will have more protection than required while Canadian stakeholders who purchase and use the imported goods will face unnecessarily high costs.

The CITT does have a limited the right to consider whether it is in Canada’s best interests to impose AD/CV duties, but this only arises if a request for a Public Interest Inquiry is filed within 45 days of the initial AD/CV Order being issued.  Not only is this a very short period for requesting this inquiry, the right to seek a Public Interest Inquiry does not apply to Expiry Reviews.  Consequently, the broader public interest in imposing AD/CV duties is usually not taken into account.

Canada’s approach to AD/CV measure arguably violates WTO obligations.  The WTO provides that an anti-dumping measure “shall remain in force only as long as and to the extent necessary to counteract dumping which is causing injury.”[2]  Thus Canada should limit AD/CV duties to the amount actually required to offset injury rather than at an amount that may provide excess protection.

OCTG are specialized and expensive steel pipes used as drill pipe and casing in oil and gas exploration and production.  They are used by drilling companies working in oil and gas in Western Canada.  The AD/CV duties imposed on these imports increases their cost to these Canadian end-users.   This begs the question whether it is in Canada’s economic best interests to increase the cost of OCTG when it is obvious that Canada’s oil and gas sector in Alberta and Saskatchewan is facing tough times.  The answer seems obvious; the Government of Canada should take a hard look at whether it is in Canada’s best interests to continue AD/CV duties on imported OCTG in any amount.

More importantly, the decision to impose AD/CV duties on any imported goods should not be made without considering the impact of these duties on the Canadian economy as a whole because, from time to time economic conditions may mitigate against imposing AD/CV duties because of the greater negative impact on the Canadian economy.  There is precedent for the Government directing the CITT to consider the broader impact of AD/CV duties.

In 2016 the Government of Canada relied on Section 18 of the Canadian International Trade Tribunal Act to direct the CITT to conduct an economic inquiry into imports of Gypsum Board from the U.S. for sale into the Western Canadian Market.[3]  The CITT conducted this inquiry simultaneously with its Injury Inquiry into imports of U.S. Gypsum Board.[4]  In its .Report to the Governor in Council at the conclusion of its inquiry, the CITT recommended that final duties for cooperating exporters be no more than 43% of the export price;[5] a rate far below the 94.6% to 211.0% dumping margins found for cooperating U.S. exporters.[6]   Consequently, the CITT recommended a rate which it considered sufficient to offset injury which did not impose unnecessary additional costs on Canadian end users to the benefit of the economy as a whole.

Canada should consider the broader impact of AD/CV duties to determine the amount of duties that should be imposed in the circumstances.  Gypsum Board is a precedent for considering the broader economic impact and should be followed in OCTG.  However; this precedent should be applied in all AD/CV inquiries because of the imposition of AD/CV duties on any imports may cause more harm than good.  Until we recognize this simple truth Canada’s AD/CV system will not work in Canada’s best interests.  Rather, AD/CV duties will likely continue to give Canada’s domestic producers excess protection while harming Canadian end-users by unnecessarily increasing their costs.

Gordon LaFortune
Woods, LaFortune LLP

_________________

[1]   On December 17, 2019, the CITT issued its Notice of Expiry of Order in LE-2019-004 concerning its AD/CV Order against imports of OCTG from China.   On January 3, 2020, the CITT issued its Notice of Expiry of Order in LE-2019-005 concerning its AD/CV Order against imports of OCTG from Chinese Taipei, India, Indonesia, the Philippines, Korea, Thailand, Turkey, Ukraine and Vietnam.

[2]  WTO Anti-dumping Agreement, Article 11.1

[3]  Gypsum Board, CITT File Number, Reference No. GC-2016-001.

[4]  Gypsum Board, CITT File Number, Inquiry No. NQ-2016-002

[5]  Gypsum Board, CITT File Number, Reference No. GC-2016-001, para 162.

[6]  Certain Gypsum Board, Notice of Final Determination, CBSA File Number GB 2016 N

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Jean-Marc Clément
Counsel, Woods LaFortune
Montréal, Canada

As is the case with most free trade agreements, importers simply claim preferential tariff eligibility at the time of import. This claim can later be subject to verification by the customs administration in view of determining if it was valid. Proving preferential tariff entitlement requires assembling and presenting relevant facts and documents that support the claim. But just how much evidence is necessary in order to discharge that burden? In Canada there has always been a disconnect between what the Canada Border Services Agency (CBSA) deems necessary in the course of an origin verification and what the courts find satisfactory in the course of a judicial review. What follows are certain illustrations of that disconnect and how it usually gets resolved by Canadian courts.

Although Canada is a signatory to many free trade agreements, the North American Free Trade Agreement (NAFTA) is by far the most popular and widely used given the amount of trade that takes place between the United States of America (USA) and Canada. For this reason, we drafted our comments with the NAFTA rules of origin in mind. That said, most of the other free trade agreements work in a similar fashion and our remarks would equally apply as concerns them. We should also mention that, at the request of the USA, the NAFTA was recently renegotiated by the parties. Although a new agreement was reached, it hasn’t gone through the ratification process by the respective legislatures at the time of writing this article and thus our comments relate to the text currently in force as of October 31, 2019.

The burden of proof in NAFTA claims

At the risk of sounding too simplistic, importers and exporters need only prove that which is necessary in order to demonstrate eligibility, not all that the customs administration may find interesting to collect in the context of verifications. CBSA has a habit of asking for the exact same things in every origin verification they undertake regardless of how goods are said to qualify: they always ask for producer records, costed bills of material, sources supply for the materials, etc. At times, most of this information is unnecessary to demonstrate preferential tariff entitlement.

One such example can be found in the DeRonde case.[1] In 2009 the CBSA decided to conduct a NAFTA origin verification of new truck tires that had been exported to Canada by DeRonde Tire Supply Inc, a US-based tire supplier. The US exporter had certified the tires were originating under NAFTA and provided Certificates of Origin to the Canadian importers who made claims of NAFTA preferential tariffs at the time of clearance. CBSA had asked for copies of bills of materials, costed sheets, a listing of all suppliers of materials, even affidavits from the tire producers substantiating the origin of the tires. DeRonde explained that they had made claims of NAFTA eligibility based on their own “knowledge” that the goods qualified, a valid basis that NAFTA specifically allows. However, CBSA denied the NAFTA preferential tariff entitlement for having failed to present all records they had requested. Ultimately the Canadian International Trade Tribunal (CITT) decided in favour of DeRonde. It was satisfied with the case that had been presented, namely that the actual North American plant where the tires had been produced happen to be identified in the marking engraved in the tire itself; this marking was a requirement of the US Department of transportation. To the satisfaction of the Tribunal a valid demonstration had been made of production occurring entirely in North America, a requirement of the NAFTA. DeRonde further made the demonstration, via expert witness, that even assuming the non-originating status of all materials that go into the manufacture of a tire, all such material would undergo the specific tariff shift rule specified in Schedule 1 of the NAFTA Rules of Origin Regulations. But more importantly, the Tribunal was satisfied that DeRonde had discharged its burden of proof and demonstrated on balance of probability that the tires originated under NAFTA and were entitled to the preferential tariffs.

Other eligibility considerations

Over and above the alleged failure of DeRonde to provide sufficient records supporting NAFTA origin qualification, CBSA also attacked said qualification with a myriad of other allegations: the tires had potentially been comingled with other non-originating tires while in inventory, the Certificate of origin prepared at the time was invalid because it indicated that the tires had been produced only with originating materials (a false declaration in the eyes of CBSA), photographs of the tire markings that were introduced in evidence left a doubt as to whether they depicted the actual tires that had been imported at the time. All such allegations, while they could hypothetically be true, were made absent any concrete evidence or even indication they might be true. On the contrary, witness testimony during trial was all it took for the Tribunal to rule them out. Believable statements made by credible witnesses were sufficient to convince the Tribunal.

In a more recent case, Maples Industries, Inc. v President of the Canada Border Services Agency[2], the rules of tariff classification were used to reject the application of a lesser-known NAFTA rule of origin: intermediate materials. Maples Industries was a US-based producer of carpets. It had certified the NAFTA eligibility of carpets it had exported to Canada. CBSA informed them that a NAFTA verification would be conducted at their facility to validate the claim.

As allowed by NAFTA, Maples elected to choose a self-produced material to be substituted for the actual non-originating materials it had sourced from foreign suppliers in order to show that the Schedule 1 specific rule of origin had been met. This rule described a tariff-shift requirement only, from a raw material tariff classification to a finished carpet tariff classification. Self-produced materials are those that are made by the producer at an intermediate stage of the production cycle, before the finished product is created. CBSA took the position that the self-produced material (a tufted fabric) had the essential character of the finished good (a carpet), hence there was no tariff shift at all, a proposition that Maples disputed. The Tribunal rejected CBSA’s argument after a careful examination of the rules of tariff classification applicable to the intermediate material. This appears to be a new trend and is clearly an indication to the trade that CBSA will use all of the tools at their disposal to attempt to deny NAFTA origin.

Last, let’s mention an older decision that set an important precedent in NAFTA origin justification, that of MRP Retail Inc. v President of the Canada Border Services Agency[3]. This case illustrates the point that a Certificate of origin cannot easily be rendered void to deny NAFTA tariff preference eligibility. The facts are as follows: MRP retail was a Canadian importer of clothing. It had purchased T-shirts from California Sunshine, a California-based clothing company. California Sunshine had cut to shape the various components of the T-shirts, which were then sent to Mexico for sewing, returned to the USA for printing, and then sold and shipped to MRP in Canada.

CBSA had once again alluded to many defects of origin, in particular with respect to the NAFTA Certificate of Origin that had been presented, to deny preferential tariff entitlement. It had stated namely that the Certificate erroneously identified California Sunshine as the “Producer” of the T-shirts when part of the production actually took place in Mexico and had been performed by a Mexican sewer. It had also stated that the field “Blanket period” had been left blank, preventing the connection of the Certificate with the period of importation under review.

The Tribunal made two very important clarifications: the first is that a producer can outsource some of the work as long as it commissions and directs the entire manufacturing process at all times; the second is that, although the Proof of Origin of Imported Goods Regulation requires the existence of a certificate of origin as a prerequisite to NAFTA preferential tariff entitlement, the form itself was never prescribed by the regulations and thus cannot be so easily rejected for certain defects of completion. In the words of the Tribunal, even if California Sunshine had not been the producer, the requirement to present a valid Certificate would have nonetheless been satisfied. The same goes for the absence of dates in the blanket period field.

The Bottom Line

Although the courts have signalled in a very clear way that NAFTA origin and preferential tariff eligibility is something that is demonstrated on balance of probability, CBSA persists in expecting a much higher evidentiary burden. Canadian authorities still wish to question every possible theory of non-eligibility and expect to receive proof beyond a reasonable doubt before ruling out their assumptions. What’s more, NAFTA verification procedures today still expect the same degree of detail and a panoply of documents in order to proceed with the origin analysis and serve as a prerequisite for any determination of eligibility.

In light of the clear disconnect between the authorities’ expectations and the Tribunal’s views, we anticipate many more cases will be brought for judicial review in order to confirm free trade entitlements. Those who are confronted with a NAFTA denial should take the above comments into consideration.

____________________________

[1] DeRonde Tire Supply Inc. v President of the Canada Border Services Agency, CITT AP-2011-014 (July 29, 2015)

[2] Canadian International Trade Tribunal, AP-2014-009 (July 18, 2016)

[3] Canadian International Trade Tribunal, AP-2006-005 (September 27, 2007)

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Woods, LaFortune LLP has been invited  by the Trade Agreements Secretariat at Global Affairs Canada to participate in the Civil Society Forum on Trade and Sustainable Development under the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA). Michael Woods will attend on behalf of the firm. The event is to take place in Ottawa on November 12, 2019.

The Forum is facilitated jointly by the Government of Canada and the European Union and include representatives from employers, unions, labour and business organizations, environmental groups, Indigenous organizations, and other relevant civil society organizations, to exchange with one another, with members of the EU civil society, as well as officials of the Government of Canada and the European Commission, on matters related to the implementation of the CETA with regards to Trade and Sustainable Development, Trade and Labour and Trade and Environment. This will be  the second edition of the Forum – the first Civil Society Forum on Trade and Sustainable Development under CETA took place in September 2018, in Brussels, Belgium.

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Michael Woods is scheduled to appear on an expert panel  at the Council for the Advancement of Native Development Officers (CANDO) Annual Conference in Gatineau Québec on October 30, 2019.

CANDO is a Canadian Aboriginal-controlled, community-based, and membership driven organization focusing on education and professional development for economic development officers working in Aboriginal communities and organizations.

Michael will be part of a panel examining “Economic Development Opportunities in Indigenous International Trade” and he will share his insights as a member if the Indigenous Working Group advising the Government of Canada with respect to the NAFTA re-negotiations and Canada’s ongoing negotiations of other modern trade agreements.  He will also discuss the concept of an Indigenous Chapter and the related elements found in the new Canada-US-Mexico Agreement. For more information on the conference session, see: ( http://www.edo.ca/conference/2019/conference-panels/indigenous-international-trade-panel )

For more details on the conference see: ( http://www.edo.ca/conference/2019 )

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Michael Woods joined the head of the Government of Canada’s Trade Law Bureau, Robert Brookfield, Professor Lindsay Robertson of the University of Oklahoma and Professor James Hopkins of the University of Arizona  on a panel to discuss the Indigenous elements in the Canada United States Mexico Agreement (CUSMA) and the consultative process between the Government of Canada and Canada’s Indigenous communities during the NAFTA renegotiations which were launched in 2017.  This was the 7^th International Inter-Tribal Trade and Investment Organization (IITIO) trade conference and it was held at the University of Oklahoma Faculty of Law.  Michael has served on IITIO’s executive since its founding in 2015 [https://iitio.org/ ] Michael and has colleagues on the panel discussed the details of the new agreement, “the threads of (Indigenous objectives) running through it,” as well as the future of inter- tribal trade.

For more details see:

https://journalrecord.com/2019/06/03/future-of-indigenous-trade-discussed-at-iitio-conference/

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The Minister of Finance should reconsider the decision to impose safeguard measures on imports of stainless steel wire because the recent agreement between Canada and the U.S. to remove their respective duties on each other’s steel, calls into question the Canadian International Trade Tribunal’s (CITT) threat of injury finding against stainless steel wire imports which underpins the Minister’s decision.

On May 10, 2019, the Minister imposed safeguard measures on imports of stainless steel wire from almost all sources.  The safeguard measures took the form of a tariff rate quota that set a limited volume of imported stainless steel wire that could enter Canada duty-free and a surtax on stainless steel wire entering Canada above that amount.  The Minister’s decision was based on the CITT’s finding that stainless steel wire imports threatened to cause serious injury to Canada’s domestic stainless steel wire producer.

The Minister has the discretion to impose safeguard measures, but only if the CITT makes an injury or threat of injury finding and recommends that safeguard measures be taken at the conclusion of an investigation.  Without the CITT’s decision, the Minister cannot act.  Therefore, the Minister’s decision to impose safeguard measures is based on a CITT injury finding.

In this case, the CITT found that imports of stainless steel wire threatened to cause injury to Canada’s domestic stainless steel wire producers; not that the domestic steel producers had actually been injured by imports.  This means that the CITT found that the evidence pointed to an imminent and foreseeable change in circumstances that would result in serious injury to the domestic producers unless safeguard measures were put in place.  In short, the CITT concluded that a change in circumstances making things worse for the domestic producer was likely.  However, the Canada – U.S. decision to eliminate their respective duties is the only significant change since the CITT issued its threat of injury finding and that change arguably benefits the Canadian producer.

The decision to eliminate the U.S. 232 duties and Canada’s retaliatory duties played role in the CITT’s decision in the Steel Safeguard Case (Certain Steel Goods, CITT File Nbr GC-2018-001, April 3, 2019).  At page 116, the CITT found that U.S. imports had accounted for a significant share of the Canadian market (approximately 35%) from 2015 to 2017), but that the U.S. and Canadian duties changed these trade flows.  As a result of the duties, Canada’s domestic producer was less able to ship stainless steel wire to the U.S. and U.S. producers were less inclined to ship to Canada because of the improved market conditions in the U.S. caused by the Section 232 duties.  At page 118, the CITT noted that Canada’s producer lost export sales in the first half of 2018 compared to the second half of 2017 and found that the loss of potential export volumes would have a negative effect on the producer.

By eliminating their retaliatory duties, Canada and the U.S. have returned to the status quo of duty-free movement of stainless steel across the Canada – U.S. border.  Consequently, the Canadian producer will have access duty-free access to its U.S. accounts and, more importantly, will effectively have preferential access because the U.S. 232 duties will continue to apply to stainless steel wire from almost all other countries.  The return of the ability to freely export to the U.S. is an obvious benefit to the Canadian producer and could be enough to eliminate the threat of injury found by the CITT.

The CITT based its threat of injury finding on a consideration of all the evidence, and not just the impact of the U.S. Section 232 duties and Canada’s retaliatory duties.  Thus, it is not absolutely clear that removing the U.S. Section 232 duties and Canada’s retaliatory duties will eliminate the threat of serious injury, but the decision to remove these duties raises serious questions concerning the CITT’s finding and, in turn, raises questions concerning the Minister’s decision to impose safeguard measures on the basis of that finding.

Canada does not have an absolute right to impose and maintain safeguard measures.  Article 5(1) of the WTO Agreement on Safeguards provides that a Member shall only apply a safeguard measure to the extent necessary to prevent or remedy serious injury.  That is, Canada may not maintain safeguard measures if they are no longer necessary to prevent or remedy serious injury.  Consequently, if the Canada – U.S. decision to remove their respective duties on each other’s steel eliminates the threat of serious injury found by the CITT, Canada has no right to maintain the safeguard measures against stainless steel wire.

The CITT does not have the authority to review and amend its threat of injury finding on stainless steel wire.  However, the Minister of Finance can amend or revoke the safeguard measures and can direct the CITT to review its finding.  Therefore, to ensure that Canada meets its international trade obligations, and avoid any unnecessary costs to the Canadian economy resulting from unnecessary protection extended to the Canadian producer, the Minister should either revoke or reduce the safeguard measures imposed on imports of stainless steel wire or he should direct the CITT to review its threat of injury finding in light of the apparently improved market conditions resulting from the decision to remove the Canadian and U.S. duties on steel.

– Gordon LaFortune

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On May 16, 2019, the Canadian International Trade Tribunal (CITT) announced that it was initiating a Product Exclusion Review to determine whether any imports of stainless steel wire or heavy plate should be excluded from safeguard measures imposed on imports of these products. Although the CITT will only grant product exclusions in extraordinary circumstances, any interested party that imports or wants to import stainless steel wire or heavy plate into Canada from countries now subject to safeguard measures should consider the possibility of requesting a product exclusion to avoid those measures.

On April 3, 2019, the CITT issued its Report in the Steel Safeguard Inquiry (CITT File Nbr. GC-2018-001). The CITT found that imports of stainless steel wire and heavy plate caused serious injury to domestic producers and recommended that the Minister of Finance impose safeguard measures on those goods. On May 9, 2019, the Minister of Finance imposed safeguard measures on those products imported from all countries except United States, Mexico, Chile, Israel, Korea, Colombia, Honduras, Panama, Peru and all countries benefitting from the General Preferential Tariff. The safeguard measures became effective on May 13, 2019 and will remain in effect until October 24, 2021.  During this period the safeguard measures will be phased out in three stages:

May 13, 2019 to May 12, 2020

• Heavy Plate 20% surtax on imports over 100,000 mt
• Stainless Steel Wire 25% surtax on imports of 2,800 mt

May 13, 2020 to May 21, 2021

• Heavy Plate 15% surtax on imports over 110,000 mt
• Stainless Steel Wire 15% surtax on imports of 3,080 mt

May 13, 2021 to October 24, 2021

• Heavy Plate 10% surtax on imports over 54,699 mt
• Stainless Steel Wire 5% surtax on imports of 1,532 mt

Details of the safeguard measures on heavy plate and stainless steel wire, including the list of countries benefitting from GPT, are set out in the Order Amending the Order Imposing a Surtax on the Importation of Certain Steel Goods (Final Safeguards), which can be found at www.cbsa-asfc.gc.ca/publications/cn-ad/cn19-08-eng.html.

The CITT may recommend that the Minister issue product exclusions so that safeguard measures only apply to imported products that cause serious injury to domestic producers. However, getting a product exclusion is not an automatic or easy process. The CITT will only grant product exclusions in extraordinary circumstances where it is convinced, by the party requesting the exclusion, that imports of the specific products will not cause injury to domestic producers. To make this finding, the CITT generally considers factors such as:

1. Whether the domestic producers manufacture the products at issue.
2. Whether the domestic producers normally produce these types of products?
3. Whether the domestic producers manufacture substitutable or competitive products?
4. Whether the domestic producers are capable of producing the product?
5. Whether the domestic producers “active” suppliers of these products?

Any interested party that imports stainless steel wire or heavy plate that could benefit from a product exclusion must move quickly. The CITT must complete its review and make recommendations to the Minister of Finance by July 15, 2019. To meet this deadline interested parties that want to participate in the review must file a Notice of Participation with the CITT by May 27, 2019 and must prepare, serve and file their Product Exclusion Request on other parties and the CITT by no later than noon June 7, 2019.  These are firm deadlines, so there is no time to waste. A copy of the CITT’s Notice of Commencement of the Exclusion Inquiry can be found at www.citt.gc.ca/en/node/8574.

Although the CITT only issues product exclusions in extraordinary cases, obtaining product exclusion generally gives importers a competitive advantage that provides a real benefit in the market. If you are interested in the CITT’s expiry review process in this case, or if you have clients who may be interested, please contact the author at (613) 424-3921 or by e-mail at lafortune@wl-tradelaw.com. I would be pleased to discuss all aspects of the CITT process, including how to best present a Product Exclusion Request to the CITT.

Gordon LaFortune
Woods, LaFortune LLP
May 17, 2019

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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

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Michael Woods was interviewed for an article by U. S. based Corporate Counsel regarding the ongoing U.S. – China trade talks. His comments on the wider implications of the “heavyweight” battle can be seen at this link:

https://www.law.com/2019/05/06/trumps-twitter-threat-shakes-up-us-china-trade-talks-stock-market/

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