13 April 2018
Canada Considering Changes to Trade Remedy Regulations
Following the imposition by the United States of additional import tariffs on steel and aluminium from around the world, Canada announced on 27 March several measures aimed at preventing such products from being transshipped (ostensibly to the United States via Canada) or diverted (most likely into the Canadian market from the United States). These measures could weigh in Canada’s favour as the United States considers granting it a permanent exemption from the tariffs. More broadly, the proposed amendments to Canada’s trade remedy system are aimed at providing Canadian producers with a more rigorous response to unfair trade practices, improve the transparency of Canada’s trade remedy system, and better align that system with those of Canada’s major trading partners. The proposed changes include the following.
After the imposition of AD or CV duties, foreign producers may attempt to circumvent duties by making slight modifications to, or changing the pattern of production of, exported goods such that the goods no longer fall within the scope of goods on which duties apply. Circumvention undermines the effectiveness of the trade remedy system by allowing dumped and unfairly subsidised imports into the Canadian market without the proper assessment of duties.
There was previously no mechanism allowing the Canadian Border Services Agency to expand the scope of goods on which duties could be applied in order to capture importations of goods that circumvent AD and CV duties. Budget 2017 committed to the creation of new anti-circumvention investigations that would allow the CBSA to investigate allegations that AD and CV duties are being circumvented and, where warranted, to extend the scope of the duties to cover importations of goods that are circumventing existing duties.
When enforcing AD and CV duties, the CBSA determines whether imported goods are subject to duties on the basis of the product’s description and the country of origin (i.e., whether they are within the scope of the duties). In addition, prior to importation exporters and importers can request that the CBSA provide informal advice as to whether a particular shipment would likely be subject to duties upon importation. However, determinations made upon importation were not public and other interested parties (such as domestic producers) had no way to express views or challenge decisions with which they may have disagreed. Moreover, this informal advice was non-binding, enabling the CBSA to make a different determination following the actual importation of the goods.
Budget 2017 committed to providing greater transparency and opportunities for interested parties to participate in this process in two ways. First, a new formal proceeding was created to allow interested parties, including domestic producers, to request a ruling from the CBSA as to whether a particular product is subject to AD and CV duties. Unlike previous informal advice provided by the CBSA on scope, the scope proceedings would allow other interested parties to provide their views, and these rulings would be public and binding on the CBSA with respect to future importations of the same product models. Second, interested parties would have the right to appeal re-determinations, made at the second level of review, by the CBSA on whether a product that has already been imported is or is not within the scope of the duties. These measures will ostensibly provide interested parties with due process rights to fully defend their interests.
Addressing Price Distortions
In AD investigations dumping margins are normally calculated by comparing the prices of the goods when sold in the domestic market of the exporting country with the prices of goods when sold for export to Canada. However, alternative methodologies could be appropriate for calculating dumping margins if domestic prices in the exporting country do not allow for a proper comparison. This may arise because of the presence of a “particular market situation,” such as where government intervention results in price distortion.
Prior to Budget 2017, there was no flexibility for the CBSA to disregard prices in the domestic market of the exporting country because of distortions in that market. Budget 2017 committed to providing the CBSA with the ability to use alternative methodologies when calculating margins of dumping in situations where price distortions in the country of export render those prices unreliable.
Budget 2017 committed to providing labour unions with an explicit right to participate in trade remedy investigations in an effort to improve transparency and allow labour interests to be reflected in Canada’s trade remedy system.
The Canadian government has announced its intention to co-ordinate more closely with Canada’s trade partners to strengthen enforcement at the border, including by increasing the frequency of meetings between border agencies, in an effort to improve the sharing of information and enforcement action. Canada will also urgently undertake a review to make sure all relevant enforcement agencies have the resources they need to take action on unfair trade. Additionally, Canadian authorities hope to meet more often with the United States and Mexico to identify and discuss solutions to issues that harm all three countries, including transshipment, diversion and global overcapacity. Lastly, the Canadian government will participate in new federal-provincial-territorial-stakeholder committees that will meet regularly to monitor steel and aluminium trade to ensure imports do not hurt Canadian and North American jobs.