August 2023 Volume 5

WASHINGTON UPDATE

Using Trade Remedies to Deal with Low Priced Imports in Canada By Andrew M. Lanouette

Low-priced import competition from companies offering foreign products can have a devasting impact on Canadian manufacturers in terms of sales volumes and revenues, financial results, and overall company performance. Often this will occur despite deploying every tool in the business toolbox to secure volumes or pricing in the market. What Canadian manufacturers often witness is an unstoppable erosion of their position for that product. But this does not need to be the case. Under Canadian law, manufacturers can level the playing field: they can file a trade case.

Once a complaint is filed, the CBSA must determine whether there is sufficient evidence to initiate an investigation. The initiation standard is low and the CBSA’s decision is based on information reasonably available to the complainants. Once initiated, the CBSA investigates whether foreign producers and exporters are dumping products into Canada or if foreign governments are subsidizing the products. To be successful, the CBSA must find dumping margins of at least 2% and/or that the product is subsidized by an ad valorem rate of at least 1%. The CBSA’s work is focused entirely on importer and foreign exporter data. The Canadian International Trade Tribunal (“CITT”), on the other hand, separately and in parallel investigates whether the unfairly traded products are injuring the domestic industry in Canada or threatening the domestic industry with injury. In the case of injury, the CITT must find based on the data submitted by the domestic producers as well as on data that the Tribunal itself will collect, that the dumped/subsidized imports are a material cause of the injury sustained by the domestic industry. The causation standard applied by the Tribunal does not require the unfairly priced imports to be “the” cause of the injury sustained; the unfair imports simply must be “a” cause (among possibly many) that is in and of itself material. In the case where no past injury can be determined, the CITT must also consider the threat of injury and must find on a going forward basis over a 12–24-month period that the unfairly priced imports are likely to cause material injury to the domestic industry. The CITT’s proceedings (which are true “inquiries”) are much more like court proceedings, where the domestic industry is required to show that they are being injured or threatened with injury by the unfair imports based on written materials and witness testimony given at a hearing. So what does a domestic industry accomplish if it succeeds in a trade case in Canada? A successful case in Canada leads to the CITT issuing an affirmative “finding,” and the CBSA begins enforcing that finding. This consists of mandatory floor pricing levels that imports into Canada must meet or exceed if importers are to avoid being assessed duties. While in the United States, the authorities enforce dumping and subsidy orders by imposing an ad valorem tariff that matches the margin of dumping or amount of subsidy found during the previous investigation (or administrative review), Canada does things a bit differently. Instead of enforcing an ad valorem duty rate, Canada issues model-specific minimum prices—the same “normal values” used to determine dumping—that serve as a price floor for the exporter. The exporter must sell at an ex works price to Canada at or above these minimum price floors or the importer of the product in

Specifically, under Canada’s Special Import Measures Act , a domestic manufacturer can file a “complaint” with the Canada Border Services Agency (“CBSA”) alleging that products imported into Canada are unfairly traded and harming the domestic industry making competing products in Canada. Companies typically act against two types of unfair trade practices: foreign company dumping and foreign government subsidization. Unfair dumping occurs when a foreign company sells to Canada at an “export price”—essentially ex-works—that is below the “normal value.” The “normal value” is either (1) the foreign company’s selling price in the home market for the same or similar product sold in substantially the same quantities to the same levels of trade as the Canadian customers, (2) the foreign company’s fully allocated cost of production plus an amount for profit, or (3) the price at which the foreign company sells the same or similar product to third countries comparable to Canada. Unfair subsidization occurs when foreign governments or public bodies provide defined monetary or non-monetary support to foreign companies that benefit from a product sold to Canada. Canadian manufacturers must also show that the domestic industry (on a consolidated basis) has been “injured” or is “threatened with injury” by reason of the unfairly traded goods. To do this, Canadian manufacturers typically must have some declining performance— such as declining production, sales, market share, employment, or profits—due to competition with the imports.

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FIA MAGAZINE | AUGUST 2023