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IV. Enforcement

(I) The Present System

Following the preliminary determination, SIMA provides for the imposition of provisional anti-dumping and countervailing duties. These duties are based on the estimated margin of dumping or the estimated amount of subsidy determined in respect of each exporter of the subject goods to Canada. Goods imported into Canada from the date of the preliminary determination to the date of the injury finding by the CITT (i.e. the provisional period) are subject to these duties.

The final determination is a refinement of the margins of dumping or amounts of subsidy which were estimated at the time of the preliminary determination. However, the values determined at the final determination have no impact on the amount of duties which were assessed during the provisional period since provisional duties remain based on the amounts determined at the preliminary determination.

The CITT must render its final injury finding within 120 days after it receives notice of the Deputy Minister's preliminary determination of dumping or subsidization. If the CITT finds no injury or only a threat of injury, all provisional duties are refunded with interest and any posted security is returned to the importers. If the CITT finds that the dumping or subsidization has caused injury, the provisional duties are made "definitive" through a "section 55" exercise which establishes the actual margins of dumping or amount of subsidy owing on the goods.

Provisional duties paid in excess of the actual amounts owing are refunded. Where the provisional duties are less than the actual margin of dumping or amount of subsidy, no additional duties are collected (in conformity with the international WTO rules). Importations of goods made subsequent to the CITT finding are subject to definitive anti-dumping or countervailing duties based on the margin of dumping or the amount of subsidy established at the final determination.

Revenue Canada must decide who will be treated as the importer for the purposes of duty assessment. The objective is to ensure that the person in Canada who benefits most from the dumping is not insulated from any duty liability by dealing through an intermediary which clears the goods through Customs, such as a party related to the exporter.

According to the definition in SIMA, the importer is " . . . the person who is in reality the importer of the goods". Also, there are references throughout SIMA to the importer in Canada. As a general rule, a non-resident importer, customs broker or agent representing the exporter or importer is not considered to be the importer in Canada. Even though the importer of record may be a resident in Canada, it may or may not be the importer in reality under SIMA. In circumstances where the designation of the importer for SIMA purposes is not evident, Revenue Canada will consider the importer to be the purchaser in Canada for whom the goods are ultimately destined.

Once the appropriate values and parties are identified, duty is assessed. Under Canada's system of duty assessment, which is based on the issuance of prospective normal values, exporters have the option of increasing the sale price of the subject goods exported to Canada to an amount equal to the normal value of the goods. This will eliminate any margin of dumping and the importer will face no liability for anti-dumping duties at the time of importation.

The use of a prospective method of duty assessment eliminates dumping and Canadian producers are effectively protected from injury caused by dumped goods. This provides predictability to foreign exporters and Canadian importers who are aware of duty liability. Generally, the design of the Canadian prospective duty assessment system has evolved to reflect the needs of various components of the domestic economy and the government.

In subsidy cases, countervailing duties are applied to offset the amount of the foreign subsidization. Such duties are normally levied on a specific per unit amount. Unlike anti-dumping duties where the amount of duty is directly based on the difference between the selling of the goods and the normal value, countervailing duties are a fixed amount. A price adjustment in subsidy cases will, therefore, have no impact on the amount of countervailing duties which will be collected.

Revenue Canada maintains an enforcement program in respect of SIMA to ensure that SIMA duties are properly collected on subject goods. Like other customs programs, most SIMA enforcement activities are carried out primarily on a post importation basis and involve the review of customs entries that may involve imported goods subject to a SIMA finding. The large volume of importations made into Canada and the need to expedite the import process, makes it impracticable to review every transaction at the time of importation. The objective of this enforcement process is to ascertain if the imported goods are subject to a finding and establishing the amount of anti-dumping and countervailing duties which are owing, or to confirm that the amount of duty which may have been paid earlier by the importer is correct.

(II) Summary of Proposals and Recommendations

Canada uses a prospective approach, which establishes margins of dumping or amounts of subsidy which apply to future importations thereby allowing authorities to determine the amount of duty liability at the time of importation. Under this system, normal values (i.e. non-dumped prices) are established prior to the importation of goods which are subject to an anti-dumping order. If the subject goods are priced up to these normal values at the time of importation, no anti-dumping duties are levied. However, if the export price is below the normal value, anti-dumping duties equal to the difference between the normal value and the export price must be paid.

Both systems are generally comparable in terms of their effectiveness in eliminating injury due to dumping or subsidization. Where they differ is that the Canadian system is more transparent and predictable, and eliminates injury while at the same time ensuring that Canadian importers do not face unnecessary cost or impediments to the importation of goods at non-dumped prices. By contrast, the retrospective system creates uncertainty for importers as they will not know their ultimate duty liability on each shipment until months or even years after the date of importation.

The Sub-Committees view as unwise any change from the current prospective method of duty assessment. As is explained later in this report, Canada is more dependent on imports than is the United States, and it has need of a duty enforcement system that accomplishes the task of removing injurious dumped or subsidized imports with as little disruption to trade as possible. The Sub-Committees recommend no change from the prospective method of duty assessment. (10)

Section 2(1) of SIMA defines the importer as " . . . the person who is in reality the importer of the goods". Special provisions in SIMA permit someone other that the person who has accounted for the goods to be declared the importer for purposes of assessing SIMA duties. The objective of these provisions is to ensure that the person in Canada who benefits most from the dumping is not insulated from any duty liability be dealing through an intermediary which clears the goods through Customs, such as a party related to the exporter.

In the majority of importations, the importer for SIMA purposes is the same person as the importer of record. However, in circumstances where the designation of the importer for SIMA purposes is not so evident, Revenue Canada will consider the "importer in Canada" to be the purchaser in Canada to whom the goods are ultimately destined, e.g. the entity which has negotiated terms and conditions of sale or the purchase price directly with the exporter.

The proposal by the Retail Council of Canada could reduce the effectiveness of SIMA if exporters are prepared to absorb the duties and not increase prices to purchasers in Canada. The Sub-Committees consider the capacity of SIMA to protect Canadian producers from injurious dumped or subsidized goods as a primary concern, and it is disinclined to act on the proposal of the Retail Council.

The Sub-Committees view this issue as an administrative and not a statutory question. Reviews will be initated when a cause can be demonstrated; e.g. a significant change in costing or pricing in the exporter's home market. Revenue Canada generally has not refused requests for reviews. The issue is also one of resources. If the decision to undertake reviews remains with Revenue Canada, it can conduct them when personnel are available and not needed for investigations. In an era of government cutbacks, this is a reasonable position.

In order to achieve a greater level of self-assessment, which is necessary to ensure that SIMA findings have the intended remedial impact on import pricing, Revenue Canada has proposed that consideration be given to amending SIMA to provide that importers be required to clearly identify on import documents that their goods are subject to a SIMA finding and indicate the amount of SIMA duties that are payable. The Act should also be amended to require that the payment of SIMA duties occur at the same time as other customs duties and interest should be charged for late payments. Finally, penalties should apply where importers do not account for SIMA duties within the required time frames without good reason.

The Sub-Committees support the objective that SIMA findings should have the intended remedial impact on import pricing, and note that this proposal should be considered by the Minister of Finance.

The Sub-Committees ask the Minister of Finance to take these matters under advisement and to consider whether further action regarding fraud or product definition need to be taken.

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