III. Final Determinations on
Dumping/Subsidy and Injury
(I) The Present System
Once the preliminary determination is made, the SIMA process becomes bifurcated, with Revenue Canada making a final determination regarding the existence of dumping/subsidizing and the CITT determining the existence of injury.Except where the investigation is suspended due to the acceptance of an undertaking, the legislation requires that Revenue Canada, within a further 90 days, make a final decision regarding the dumping or subsidizing.
In most investigations, some verified information is available at the preliminary determination. The investigation for the final decision consists of visiting additional firms not yet visited during the first 90-day period, verifying new information, revisiting exporters for clarification of details and visiting importers if necessary. The purpose of the final investigation is to obtain precise normal values or amounts of subsidy for use in the Deputy Minister's final determination or, alternatively, for the termination of the investigation. Where sufficient data has been collected, normal values or the amounts of subsidy are calculated on the basis of this data. Where sufficient information is not available, the calculation should be made on the basis of facts available.
If during the final investigation it is determined that the information or evidence shows that there is no dumping or subsidizing, that the margin of dumping or the amount of subsidy is insignificant, or that the volume of dumped or subsidized goods is negligible, then the Deputy Minister will terminate the investigation and all parties are notified in writing.
Conversely, if the investigation is not terminated, a final determination will be made. In the final determination of dumping or subsidizing, the precise margin of dumping or amount of subsidy is specified for each exporter and all parties are notified in writing. The final results are provided to the Tribunal for consideration in its inquiry into the matter of injury caused by the dumped or subsidized goods.
As in the case of the preliminary determination, Revenue Canada officials provide interested parties with an opportunity for a disclosure meeting, at their request, to fully explain how the normal values and export prices or amounts of subsidy were finally calculated. The result of Revenue Canada's consideration of their representations following the preliminary determination is also reviewed.
The final determination on dumping or subsidizing, or the termination of the investigation, represents the conclusion of the investigation by Revenue Canada under the Act. Under certain conditions, parties may appeal the decision of the Deputy Minister to make a final determination or to terminate an investigation to the Federal Court of Canada, or in the case of goods from a NAFTA country, parties may request a Binational Panel to review the decision under the terms of NAFTA.
While Revenue Canada is arriving at its final determination regarding dumping/subsidizing, the CITT initiates its inquiry regarding the existence of injury. Within 120 days of receiving notice of a preliminary determination, the Tribunal must complete this inquiry and issue a decision or "finding" as to whether the dumping or subsidizing of the goods has caused injury or retardation or is threatening to cause injury to the production in Canada of like goods. Alternatively, the Tribunal may find that the dumping or subsidization would have caused injury or retardation except for the fact that provisional duty was imposed in respect of the goods.
The Tribunal's finding on the question of injury may be one of three possibilities. First, the Tribunal may make a finding of no injury. Such a finding ends all proceedings in the investigation. In such a case, Revenue Canada refunds to the importer all provisional duties collected and returns any security that was posted.
Second, the Tribunal may conclude that injury has occurred, and impose anti-dumping or countervailing duty payable on all dumped or subsidized goods imported during the provisional period and on all shipments released after the date of the Tribunal's finding, until such a date that the finding is rescinded. Furthermore, if the Tribunal may also find that massive importations of dumped or subsidized imports have caused injury, in which case retroactive duty may be assessed on goods that were imported in the period starting on the day the investigation was initiated and ending in the day of the preliminary determination.
Third, the Tribunal may make a finding of threat of injury. In such a case, no anti-dumping or countervailing duty is payable on goods released before the date of the Tribunal's finding. Any provisional duty paid on importations prior to this date is returned to the importer with interest. However, duty is payable on all dumped or subsidized imports released after the date of the finding, unless covered by a valid undertaking.
Tribunal findings remain in place for five years unless they are reviewed by the Tribunal and a new order or finding is made to continue the finding for a longer period of time or to rescind it sooner.
(II) Summary of Proposals and Recommendations
- 1. Material injury. The Canadian Steel Producers Association and the Canadian Pasta
Manufacturers Association proposed that a more explicit definition of "material injury" should
be incorporated in SIMA, possibly along the lines of the U.S. definition, which is "injury which
is not immaterial, inconsequential or unimportant". The Canadian Pasta Manufacturers
Association attributed in part the difference in legal definitions as the explanation of why
dumped pasta was found in a recent case to cause material injury in the United States, while in a
similar case in Canada there was a negative finding on injury.
The Sub-Committees decline to make a recommendation on this matter. First, SIMA contains a new, post-WTO definition of injury, "material injury to a domestic industry", which is further elaborated in SIMA Regulations 37.1 which prescribes factors for determining injury. Some time should be allowed for the CITT to become familiar with this changed regime. Adopting the U.S. definition at this point could create uncertainty in the interpretation of existing law.
Second, it is not clear prima facie that the U.S. definition would provide any additional guidance over the Canadian definition. At base, the matter is one of judgment, and over time the frequency of positive injury findings by the CITT and the U.S. International Trade Commission are comparable.
Third, the pasta case may not be a sufficient basis for comparing interpretations of material injury in Canadian and U.S. trade remedy actions. The case turned more on causality than on material injury, it involved some product differences, and the time periods were different. Such differences could give rise to different interpretations within the same jurisdiction, as well as across jurisdictions.
- 2. Improve CITT operating procedures. Several parties raised concerns about injury proceedings
before the CITT. It was proposed that the CITT should shorten and streamline its hearing
process, that the CITT should require the filing of written briefs, and that it should exclude from
hearings those parties that have not filed briefs.
As indicated by the CITT Chairman in testimony before the Sub-Committees, the Tribunal completed a review of its procedures which involved consultation with stakeholders. The review recommends ways to streamline the process and place less emphasis on lengthy hearings. The Sub-Committees suggest to the government to take note of the tribunal's report and to give it the consideration that it merits.
- 3. Evidence of dumping in other countries. The Canadian Steel Producers Association proposed
that: "When the CITT is assessing the threat of future injury to a Canadian industry, require it to
consider as evidence of likely future dumping the fact that similar products have been dumped
in other countries, as evidenced by anti-dumping findings in other WTO member markets."(11)
(11) Brief of Canadian Steel Producers Association of October 30, 1996.
The Sub-Committees note that in the assessment of threat of injury, SIMA Regulations 37.1 already authorizes the CITT to take account of "any other factors that are relevant in the circumstances", which clearly could lead to a consideration of dumping in other countries. However, reference to this issue specifically provides valuable guidance to the CITT, and therefore the Sub-Committees recommend the inclusion in SIMA Regulations the fact of dumping in third country markets as evidence of threat of future injury. (6)
- 4. Consultative mechanism with United States. The Canadian Pasta Manufacturers Association
proposed that Revenue Canada and the CITT should establish a formal mechanism to consult
with the U.S. Department of Commerce and the International Trade Commission if similar
trade remedy actions are under consideration in the two countries.
The Sub-Committees are advised that Chapter 19 of NAFTA provides for consultation on anti-dumping and countervailing duty matters, and that informal and occasional contacts are already established between Revenue Canada and the Department of Commerce. However, it would be inappropriate for the CITT as a quasi-judicial body to engage in similar consultations in connection with an ongoing case.
- 5. Dumping investigations of distributors/service centres. The Automotive Parts Manufacturers
Association and Canadian Importers Association propose that the Revenue Canada should
allow distributors and service centres to use their arms' length purchase price, not their
suppliers' cost of production, as the basis for the determination of dumping. The alleged reason
for this proposal is that it is often difficult for small foreign exporters to comply with Revenue
Canada's requests for information, especially if the exporter is a distributor or wholesaler that
does not have access to the original manufacturers' production costs. It is further alleged that
the present policy of Revenue Canada is to deem the response incomplete and apply punitive
dumping duty rates. This proposal, claim both Associations, would reduce the imposition of
unfair duties.
The Sub-Committees note it would be difficult to address this issue in terms of statutory change, since it would mean establishing in effect different categories of exporters (e.g. original manufacturers, distributors). There is flexibility in law and administrative practice in the context of "best facts available" procedures to distinguish between exporters who have difficulty complying with Revenue Canada's requests for information, and those that intentionally avoid responding to those requests.
- 6. Undertakings. The Canadian Importers Association and the Retail Council of Canada proposed
that the negotiation of undertakings by Revenue Canada should allow for representations from
interested parties, and that undertakings should be reviewed within a specific time period and be
in place no longer than five years. At present, section 53(1) of SIMA requires a review of any
undertaking at least every five years to determine if it should be renewed.
The Sub-Committees note that Revenue Canada's administrative practice and not SIMA govern the negotiation of undertakings. Recognizing the potential of undertakings to cause disruption in domestic markets, the Sub-Committees recommend that Revenue Canada make allowance in regulations to accommodate representations from interested parties when undertakings are being considered. (7)
Furthermore, the Sub-Committees recommend that section 53(2) of SIMA be amended to allow the Deputy Minister of National Revenue to review and terminate undertakings before five years. (8)
- 7. Cumulation. The Canadian Steel Producers Association proposes that SIMA should require the
CITT to assess the impact of dumped or subsidized goods cumulatively, as it is the cumulative
impact which in fact causes injury.
Currently cumulation is discretionary in injury inquiries under section 42(3) of SIMA, although it is mandatory in U.S. law. The Sub-Committees note that the practice of the CITT is to cumulate in virtually all cases.
The Sub-Committees recommend that SIMA be amended to make cumulation mandatory in the CITT's procedures for determining injury. (9)
- 8. Sales of similar goods. The Canadian Importers Association proposes that-in the
determination of normal value - SIMA should be amended to provide for the progression to
sales of similar goods (those with minor technical differences) in the case of single home market
sales of like goods, instead of the progression to the constructed cost approach as is now the
practice.
There are two issues here. First, in determining normal value, section 16(2) of SIMA does not permit the use of sales of like goods to a single customer. The rationale is that such sales could be unreliable, uneconomic or otherwise made principally to establish a normal value. By comparison, U.S. law is more lenient than Canada's. The Sub-Committees are disinclined to reduce the protection to Canadian producers provided by section 16(2) of SIMA.
Second, on the matter of similar goods, there is already some flexibility built into the definition of like goods in section 2(1) of SIMA, in that if there are no "identical goods" Revenue Canada can look at goods that "closely resemble" the goods in question. To move beyond the "like goods" definition could raise problems of consistency with the WTO Anti-dumping Agreement, since Article 2.2 of that Agreement speaks only of "like products", and in the absence of such products directs the investigating authority to use third-country or constructed cost approach.
- 9. Domestic market. The Canadian Steel Producers Association proposes that the CITT should be
required, in defining the domestic market for the purposes of injury assessment, to exclude
shipments among affiliated companies. Lack of such a requirement has allegedly led to
uncertainty and inconsistency. The open domestic market is where imports compete directly
with Canadian products.
The Sub-Committees note that the CITT collects information on all sales in the domestic market (captive and merchant) respecting its production analysis contained in its staff report. However, with respect to its analysis on injury and causation, it focuses on sales in the merchant market. There appears to be no issue outstanding with the Canadian Steel Producers Association on this matter.