August 2023 Volume 5

WASHINGTON UPDATE

Canada will pay duties on every sale in the amount of the difference between the actual export price used to import the product into Canada and the model-specific normal value determined by the CBSA during its investigation. Most importantly, foreign exporters do not get credit for making sales above normal value: in order words, they cannot offset dumped sales with undumped sales like under the U.S. system. A Canadian dumping finding, therefore, forces the exporter to “price up” to their normal values to avoid having their Canadian importing customers pay duties. For subsidies, the CBSA determines a per unit monetary amount (set in the foreign country currency) that the Canadian importer must pay on every product imported into Canada. That per unit amount is based on the level of subsidy found by the CBSA during its investigation. Both the normal value and the amount of subsidy can be updated by the CBSA during the life of the finding through “re-investigations” when market conditions (e.g. product prices or costs) change. The next question then becomes: With normal value price floors and subsidy rates in place, what is the actual benefit to domestic industries in Canada? Typically, trade cases benefit domestic industries in two ways. The first typical result of a Canadian trade case is that exporters exit the Canadian market entirely or significantly reduce their sales volumes in Canada. In the normal course, the normal values established by the CBSA through their investigation of foreign company pricing and cost data can make foreign companies uncompetitive in the Canadian market. As a result, domestic producers typically regain market share previously captured by the unfairly traded goods. An example of this is the case of Small Diameter Line Pipe from China . In 2014, the last full year before the finding was issued by the CITT, imports from China were trending at nearly 200,000 MT per year. By the year after the finding was issued, i.e., calendar year 2016, imports from China had fallen to a mere 4,000 MT and ever since have never exceeded 20,000 MT per year. In other words, the finding caused Chinese exporters to abandon the Canadian market. This provided the domestic industry with a much-needed opportunity to recapture market share. The second way that Canadian domestic industries benefit from trade cases is that market prices typically rise in the Canadian market as the exporters need to raise their prices above normal value to avoid dumping duty assessments. This allows the domestic producers to improve their profitability. An example of this is the 2016 Gypsum Board case. In the context of that trade case, the domestic industry raised its prices by 30 percent almost immediately after the CBSA imposed provisional duties (90 days after the Agency initiated the investigation). Thanks to the imposition of final duties and the issuance of normal values, the sole remaining Canadian gypsum board manufacturer in Western Canada has used the leveled playing field to focus on raising its selling prices and regaining profits after previously having to lower prices to hold onto its declining market share in competition with the dumped gypsum board imports.

The Canadian trade remedies system exists to protect the domestic industry when it faces unfair competition from imports. It is a powerful tool that many Canadian manufacturers do not realize they have in their toolbox, and it can and should use to level the playing field whenever unfair import competition impacts their operations. Andrew M. Lanouette Partner Cassidy Levy Kent Email: alanouette@cassidylevy.com

FIA MAGAZINE | AUGUST 2023 7