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I. Introduction


(I) The SIMA Process

The Special Import Measures Act (SIMA) is the principal legal instrument governing the use of anti-dumping and countervailing duties.(1) The Department of Finance is responsible for the elaboration of SIMA policy and legislation. Revenue Canada and the Canadian International Trade Tribunal (CITT) are responsible for administering the SIMA system.


(1) Special Import Measures Act, R.S.C., 1985, ch. S-15.

Canada operates a partially bifurcated trade remedies system under SIMA. The Deputy Minister of National Revenue is responsible for initiating investigations and making preliminary and final determinations respecting dumping/subsidizing and preliminary determinations of injury. The Canadian International Trade Tribunal (CITT) is responsible for making final injury determinations. Under normal circumstances, SIMA requires that the investigation process, from initiation to final order, be completed within 210 days.

Under SIMA, a Canadian industry is entitled to trade remedy assistance if it is established, through a formal investigation, that the imports are being subsidized or dumped and that the subsidizing or dumping has caused or threatened to cause injury. Revenue Canada receives complaints from Canadian producers and determines whether these are properly documented. Once a properly documented complaint is received, the Department has normally 30 days to decide whether or not to initiate an investigation; see Graph 1. In making this decision, Revenue Canada must have a reasonable indication of injury, and subsidization or dumping.

Revenue Canada will, normally within 90 days of initiating an investigation, terminate the investigation either because there is no significant amount of dumping/subsidization found or no evidence of injury. Alternatively, they will issue a preliminary determination of dumping/subsidizing and a reasonable indication of injury. If a preliminary determination is made, provisional duties will be levied on dumped/subsidized imports to protect the Canadian industry pending completion of the investigation.

After a preliminary determination, foreign exporters or governments can offer undertakings aimed at eliminating the dumping/subsidizing or injury to the Canadian industry. Where undertakings are accepted by Revenue Canada, the investigation is normally suspended and no provisional duties are collected while the undertakings are in force.

Where an investigation is not suspended as a result of undertakings, Revenue Canada will continue its investigation respecting dumping/subsidizing and issue a final determination within 90 days of the date of the preliminary determination. This final determination will specify the precise margin of dumping or amount of subsidy. The basis of the decision will be the data received from the parties, along with any third-party submissions. The final determination on dumping/subsidizing or the decision to terminate an investigation is the final step in the SIMA process involving Revenue Canada.

The CITT is an independent quasi-judicial body responsible for making a final determination on injury. If the CITT finds that injury has been caused to the domestic industry, definitive anti-dumping/countervailing duties are normally levied on all goods imported on or after the date of the preliminary determination. Where the CITT finds that the dumped/subsidized imports have not caused injury but are threatening to do so, anti-dumping/countervailing duties are levied on those goods imported after the date of the CITT's decision, with any (provisional) duties collected prior to that date being refunded.

Anti-dumping and countervailing duty orders terminate after five years, unless the CITT decides, pursuant to a review initiated prior to the order, that there is likely to be a continuation or recurrence of dumping/subsidizing and injury. SIMA also provides the authority for the CITT to conduct public interest investigations once a positive injury finding is made.

(II) Anti-Dumping and Countervailing Duty Actions

As with many industrial countries, Canada uses anti-dumping measures more than any other trade remedy. During the period 1992-95, Revenue Canada received approximately 170 complaints and initiated 31 cases. Thirty of these cases received a positive preliminary determination from Revenue Canada and four cases were resolved through price undertaking agreements. The remaining 26 cases continued to the injury inquiry stage where the CITT made 18 positive injury determinations and found no injury in 8 cases.

The result of this activity was that by the end of 1995, 90 anti-dumping duties were in force in Canada, which made Canada rank third among the World Trade Organization (WTO) members.(2) By comparison, in 1995 the United States had 305 anti-dumping measures in force; the European Union, 178; Australia, 86; and Mexico, 42.


(2) Anti-dumping duty orders can apply minimally to one exporter in one country, or to combinations of exporters and countries. The figure 90 is derived from 37 current orders extended over a number of exporters and countries.

While subject to the same framework provisions as anti-dumping measures, countervailing actions have been relatively rare in Canada. At end-1995, Canada had six measures in force, affecting mainly farm exports of the European Union (EU) or individual EU member states. Of these, four were introduced in the mid-1980s and have been renewed ever since. Among the initiations since January 1994, subsidized sugar from the European Union was found to have been threatening injury, while an investigation into subsidized sugar from the United States was terminated because subsidies were found to be negligible. However, an anti-dumping measure is in place against the United States on sugar.

It is important to note that from the perspective of the Canadian economy, trade remedy actions have had relatively small impact. During the period 1991-94, anti-dumping actions affected about $1 billion of imports per year on average, or one per cent of total imports into Canada. Dumping margins were highly variable, however, ranging from 5.5% to 64.29%, with an average of 37%. These duties have a substantial impact in the industries where they occur.

There has been a downward trend in the trade remedy cases initiated under SIMA since the mid-1980s, with the exception of a cluster of cases in 1994. For example, between July 1994 and June 1995, Canadian agencies initiated nine anti-dumping investigations (excluding review cases), followed by six investigations over the period until June 1996. Similarly, the United States has not initiated a new case against Canada since the completion of the Uruguay Round agreements in December, 1993. It is too early to tell if this recent trend will continue into the future.

(III) The International Framework

The circumstances under which trade remedy actions can be taken and rules respecting the conduct of investigations are largely governed by the World Trade Organization (WTO) Agreements of 1994, two of those are of particular importance in the SIMA context, the WTO Subsidies Agreement(3) and the WTO Anti-dumping Agreement.(4) Key provisions of these Agreements include methods for determining the existence of dumping and countervailable subsidies, requirements for the initiation of investigations, obligations respecting procedural fairness, duration of orders, and transparency in decision-making. In addition, these Agreements set out the economic factors to be considered in determining whether injury exists and whether or not such injury is caused by dumped or subsidized imports.


(3) Agreement on Subsidies and Countervailing Measures, (being part of), Annex 1A, of the Final Act Embodying the Result of the Uruguay Round of Multilateral Trade Negociations, Marrakech, Apr. 15, 1994. (reprint in), The Results of the Uruguay Round of Multilateral Trade Negociations, GATT Secretariat, Geneva 1994. (Hereinafter, WTO Subsidies Agreement).
(4) Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade - 1994, (being part of), Annexe 1A, of the Final Act Embodying the Result of the Uruguay Round of Multilateral Trade Negociations, Marrakech, Apr. 15, 1994, (reprint in), The Results of the Uruguay Round of Multilateral Trade Negociations, GATT Secretariat, Geneva, 1994. (Hereinafter, WTO Anti-Dumping Agreement).

Canada is obliged in making alterations to SIMA to respect the previously negotiated limitations of the WTO Agreements. Were Canada not to do this, it would be liable to an adverse ruling by a dispute settlement panel, and even to the imposition of trade sanctions by its trading partners.

Since SIMA's establishment, important steps have been taken to liberalize Canada's trade through regional free trade agreements, although these liberalization initiatives have not led to fundamental changes in the trade remedy framework. For Canada, concerns about the use of trade remedies within hemispheric free trade areas have become particularly acute given the importance of access to the U.S. market for Canadian exports and the high level of economic integration between the Canadian and U.S. markets. Many firms have organized their operations on a continental basis and goods often move back and forth across the Canada-U.S. border several times before they are incorporated into final products. U.S. anti-dumping or countervailing duty actions against Canadian exports can thus impair access to the large U.S. market and undermine economic benefits provided by the NAFTA.

Although Canada would like to eliminate anti-dumping remedies in the context of free trade areas, (as it has been demonstrated in the Free Trade Agreement with Chile), the Sub-Committees are of the opinion, after having heard testimonies on this subject, that the elimination of anti-dumping remedies even though this would be the ideal, is unrealistic in the short and medium term without endangering Canadian industries. Thus far, the U.S. government and U.S. industry have not been receptive to Canadian efforts to seek alternative arrangements or substantive reforms to existing trade remedy laws.

(IV) The SIMA Review Process

SIMA was initiated in 1984 to consolidate and modernize Canada's trade remedy laws. Instrumental in the establishment of SIMA were the Proposal on Import Policy, a discussion paper of the Department of Finance of July 1980, and the 1982 Report of the Parliamentary Sub-Committee chaired by the Honourable Bryce Mackasey, P.C. This report brought forward key principles and recommendations aimed at improving the accessibility and effectiveness of the trade remedy system while ensuring greater transparency and equity to all affected parties.

In 1988, Revenue Canada undertook a study evaluating the administration of SIMA. This study addressed operational issues such as disincentives to use SIMA, the level of compliance by importers, and organizational procedures and human resources.

The Department of Finance commenced a policy review of SIMA in 1991, but this was suspended pending the outcome of the Uruguay Round of GATT Multilateral Trade Negotiations. Subsequently, substantial changes were made to SIMA in 1994 to implement Canada's obligations pursuant to the Uruguay Round Agreements. These changes included important issues such as definition of subsidies, injury determination, and procedures for establishing dumping margins.

In his 1992 Report, the Auditor General of Canada noted that since 1984 when the SIMA legislation came into force, the Department of Finance had not completed a formal policy evaluation of the positive and negative effects of the legislation. The Auditor General stated that:


(5) Report of the Auditor General of Canada to the House of Commons 1992, Chapter 19 - Department of National Revenue - Customs and Excise, Special Import Measures Act, p. 461.

The Auditor General concluded that the government authorities, industries seeking trade remedy assistance, and others that may be affected by such measures, had gained sufficient experience to permit a timely assessment of the legislation's effectiveness.

Two Sub-Committees were established in May and June 1996, with a mandate to jointly conduct hearings and to report to Parliament in December 1996. In carrying out this mandate the Sub-Committees have conducted nine hearings, heard testimony from 32 individuals or groups, and received written briefs from an additional 8 individuals or groups. The Sub-Committees have further benefitted from comments made by the agencies responsible for administering the legislation.

(V) Overall Assessment of the Sub-Committees

The conclusion of the Sub-Committees following the completion of the hearing process is that SIMA is working well and continues to be relevant to the competitive needs of the Canadian business community. The legislation adequately protects those firms being injured by dumped or subsidized imports, while at the same time it accounts for the potential negative effects of anti-dumping and countervailing duty actions on consumers and downstream industries. Therefore, the Sub-Committees recommend that the SIMA legislation and process be continued, subject to the modifications addressed in this report. (1)

There was considerable evidence for the above recommendation. The majority of witnesses who appeared before the Sub-Committees expressed support for SIMA. For example, the Canadian Sugar Institute states: "Based on CSI's experience, it is our view that the existing law is generally effective and well administered."(6) The Canadian Carpet Institute stated it "considers SIMA to be an effective and necessary piece of legislation."(7) Even the Canadian Steel Producers Association and the Automotive Parts Manufacturers Association that were critical of SIMA nevertheless voiced support for the legislation. The Canadian Steel Producers Association stated: "Overall the Canadian system has served Canada well. This brief therefore proposes incremental rather than fundamental changes."(8) And the Automotive Parts Manufacturers Association stated: " . . . the majority of member companies responding to a survey reported that the law has worked for them."(9)


(6) Brief of the Canadian Sugar Institute of October 30, 1996.
(7) Brief of the Canadian Carpet Institute.
(8) Brief of the Canadian Steel Producers Association of October 30, 1996.
(9) Brief of the Automotive Parts Manufacturers Association of October 30, 1996, Appendix A.

The views quoted above are further supported by many other direct statements, and by a number of submissions seeking no change at all or merely minor adjustments.

However, there were a number of proposals for changes to SIMA. It is the opinion of the Sub-Committees that these proposals did not represent opposition to SIMA, but were rather an attempt to modify the balance struck between producers and downstream users of imported products and consumers. Further, the proposals addressed dissimilarities between the Canadian and U.S. trade remedy systems, or were intended to improve procedural aspects of SIMA administration. These proposals are addressed in the various sections below.

The report which follows is organized around the chronology of the SIMA process, namely, the initiation of an investigation through the preliminary determination; the final determination; enforcement procedures; reviews; and public interest and other matters.


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