Canada's trade defense measures

a. General introduction

Trade defense measures (including anti-dumping, anti-subsidy and safeguard) are tools that can create barriers to the flow of imported goods (through anti-dumping, anti-subsidy, safeguard investigations and then applying additional tariffs/import restrictions). These are measures that the WTO allows importing countries to use to deal with the situation of imported goods from foreign countries being dumped, subsidized or imported massively into their country causing significant or serious damage to the domestic industry. However, the WTO requires importing countries to comply with certain conditions, requirements as well as procedures when investigating and applying these measures.

Canada is a country that commonly uses trade defense tools. Canada has been using trade remedies: anti-dumping, countervailing, safeguard and anti-circumvention measures against imports into the country.

According to the Canadian International Trade Tribunal (CITT), Canada is a trading nation. The economic prosperity of the country and of Canadian producers depends on secure access to key export markets and a reliable flow of competitively priced imports from markets around the world. That is why Canada has long advocated international trade rules that level the playing field for its partners around the world and ensure that Canadian producers can trade on terms that are not only free but also fair.

Free trade provisions promote healthy global competition. Among these, trade defense tools are intended to ensure that unfair trade practices do not harm Canadian producers, and they “undermine” the ability of unfair trade practices to access global markets.

Under Canadian law, anti-dumping, countervailing, and circumvention investigations are conducted by the Canada Border Services Agency (CBSA), pursuant to the Special Import Measures Act (SIMA), to determine whether dumping, subsidization, or circumvention is occurring. If an unfair trade practice is found to have occurred, the Canadian International Trade Tribunal (CITT) will modify the measure to extend duties to the imports subject to the investigation. The Canadian International Trade Tribunal is at the forefront of Canada’s efforts to balance free and fair trade.

b. Antidumping and Countervailing Measures

In Canada, antidumping and countervailing measures are considered the two pillars of the system of trade defense measures in international trade and are used as a safety valve to protect domestic markets from the penetration of foreign goods. In essence, antidumping and countervailing measures are applied to deal with unfair or unfair competition from imported goods. While antidumping measures are to deal with the act of selling products at low prices to dominate the market and gradually eliminate competitors, countervailing measures are applied to eliminate the negative impact caused to the domestic production of goods originating from the subsidy policies of the exporting country's government. Specifically:Dumping occurs when goods are exported to importers in Canada at prices lower than the selling price of the goods in the exporting country or when goods are sold to Canada at prices that are not beneficial to the domestic industry. The amount of dumping on imported goods can be offset by the application of "anti-dumping" duties.

Meanwhile, subsidization occurs when goods imported into Canada benefit from financial support from the government of the exporting country. The amount of subsidy on imported goods can be offset by the application of "countervailing" duties. Examples of subsidies: preferential loans, subsidies, tax incentives, etc.

When imports into Canada are found to be engaging in unfair competition, if they cause or threaten to cause material injury or material retardation to a domestic industry, anti-dumping and countervailing measures may be applied.

The CITT is responsible for administering Canada’s domestic law by regulating unfair trade practices, and the Special Import Measures Act (SIMA) and the Canada Border Services Agency (CBSA) work together to resolve cases involving the application of trade remedies.

Required Documents

Industries that produce goods identified as engaging in unfair competition may file a complaint with the CBSA if they believe that imports are being dumped or subsidized and causing serious injury to a Canadian industry. Producer associations may also file complaints on behalf of their members. A written request for antidumping and countervailing measures must include information about the Canadian-produced goods, competing imports, the domestic industry, and conditions in the Canadian market. In addition, the request must provide evidence that the imported goods are being dumped or subsidized and that the Canadian industry is being injured.

Initiation

The CBSA will assess the request and may initiate a formal investigation to determine whether imports into Canada are being dumped or subsidized. To ensure that there is sufficient Canadian industry support for the investigation, producers representing at least 25% of the total volume or quantity of like goods produced by the domestic industry.

The decision to initiate an antidumping or countervailing investigation is made within 30 days of receipt of the request. If the CBSA believes that there is evidence of dumping or subsidization occurring, based on the anti-dumping and countervailing factors set out in the regulations, the CBSA will initiate an investigation. The decision to initiate may be made with respect to some or all of the goods identified in the application. Similarly, an investigation may relate specifically to certain goods from a country. The CBSA will determine how an investigation is initiated, depending on the circumstances of each case.

If the CBSA decides not to initiate, all actions related to the application are terminated. The CBSA will notify the applicant and provide reasons for its decision.

Upon initiation, a Request for Information (RFI) (questionnaire) will be sent to importers, exporters, suppliers and manufacturers of the foreign goods under investigation, as well as Canadian producers of like goods, to obtain information necessary for the investigation. The questionnaire is accompanied by a General Guide to assist parties in preparing the necessary information, which identifies the investigation period and explains the information that will be provided for specific situations, as well as the rules for handling, using and disclosing confidential information.

Investigation Process

An injury investigation will be conducted independently by the CITT immediately after the CBSA sends a copy of the application for anti-dumping and countervailing measures against imports into Canada. The CITT holds public hearings where interested parties are allowed to present their arguments and question witnesses. Interested parties typically include Canadian producers and importers, as well as foreign exporters.

Preliminary investigation: Pursuant to section 34(2) SIMA, the CITT must issue a notice of preliminary investigation of injury in the Official Gazette if the CBSA investigates dumping and/or subsidization after receiving a complete and valid application. The CITT must send this notice to the CBSA. The notice is also sent to the petitioner, all known importers, exporters, foreign producers, relevant foreign governments, any trade associations known to have a particular interest in the preliminary investigation or unions representing employees of the domestic industry. The CITT also publishes notices and a schedule of events on its website. This notice sets out the procedures and guidelines for the issues that interested parties must raise in their submissions. The CITT has 60 days to receive submissions from interested parties and governments, and to decide whether there is reasonable evidence of injury by reason of imports. Due to the short time frame, the CITT relies primarily on information provided by the CBSA and submissions from the parties. Occasionally, the CITT issues questionnaires focused on specific issues or holds one-day hearings to address specific legal issues. Based on the information received, the CITT must decide whether the evidence “reasonably indicates” that the Canadian producer has been injured or threatened with injury by dumped/subsidized imports. SIMA does not define “reasonably indicates,” but the CITT considers whether the information is relevant, accurate, and complete. In other words, the CITT considers whether the domestic producer’s allegations can be tested. If the CITT concludes that there is no injury, it will issue a decision and provide reasons for its decision, and the CBSA investigation will be terminated.

If the CITT concludes that there is reasonable evidence of injury, the CITT issues its decision and reasons, and the CBSA has an additional 30 to 75 days to make a preliminary determination of dumping/subsidy and impose preliminary duties or terminate the investigation (if there is no dumping/subsidy) and thereby terminate the CITT's injury investigation proceedings.

The CITT may also consider whether to exclude certain products (at the request of a party or on its own initiative) from the scope of the duties if there is evidence that the imports do not cause injury to the Canadian producer (e.g. there is no domestic production of the like product). This process involves the filing of an exclusion request, a response from the domestic industry to the request, and a response from the party requesting the exclusion.

Once the decision is made, the CITT must issue a report explaining its decision within 15 days.

If the CITT concludes that the Canadian producer is injured/threatened with injury, the CBSA will impose anti-dumping/anti-subsidy duties and the order will be effective for 5 years.

Final investigation: Under section 42 of SIMA, the CITT must issue a final investigation notice if the CBSA makes a preliminary finding of injury/subsidy (this notice is also sent to the parties and is made public in the same way as in the preliminary investigation).

Investigation Notice: Briefly describes the role and responsibilities of the CITT in conducting the final injury investigation. Details of the notice are set out in Article 54 of the CITT Regulations. At the beginning of this phase of the investigation, the CITT transfers the previous phase file to this phase file. This phase lasts 120 days and has two phases: the investigation phase (information is gathered) and the adjudication phase (information is assessed and a decision is made).

The CITT may also consider whether to exclude certain products (at the request of a party or on its own initiative) from the scope of the tariff if there is evidence that the imports do not cause injury to Canadian producers (e.g. there is no domestic production of the like product). This process involves the filing of an exclusion request, a response from the domestic industry to the request, and a response from the party requesting the exclusion. After issuing a decision, the CITT must issue a report explaining its decision within 15 days.

If the CITT concludes that the Canadian producer is injured/threatened with injury, the CBSA will impose an anti-dumping/anti-dumping duty and the duty order will be effective for 5 years.

This process takes approximately seven months from the time the CBSA initiates an investigation until the CITT makes a final injury determination. The CBSA investigation and the CITT investigation are conducted separately, but both are conducted within the same time frame.

Re-investigation of normal value

For goods previously subject to trade remedy duties, the CBSA may initiate a notice of initiation of a re-investigation of normal value, export price to update the dumping margin, subsidy margin. Under the SIMA Act, investigations to re-determine the dumping margin will not include a re-investigation of injury to the domestic industry. The CBSA requires interested parties to submit a response to the request for information as well as other relevant information, comments, arguments (if any) within the prescribed time limit (see table below). If necessary, the CBSA will conduct on-site inspections of manufacturers and exporters.

In the event that an exporter of the goods concerned fails to provide sufficient information to the CBSA to re-determine the normal value, export price or does not consent to an on-site CBSA investigation, the anti-dumping duty will be calculated based on the available evidence, with the re-investigation anti-dumping duty at least equal to the duty determined in the original case. The determination of the dumping margin for trading companies will depend on the responses to the questionnaire by the suppliers/manufacturers of the goods to those companies.

The CBSA will send the investigation questionnaire to all exporters known to the investigating authority. Exporters who do not receive the investigation questionnaire but wish to respond to the investigation questionnaire and provide information to the CBSA may contact the CBSA directly to receive the investigation questionnaire.

Interim review

The CITT may also conduct an interim review (either on its own initiative or at the request of an interested party). Parties may request an interim review to exclude a particular product because it is no longer available in Canada, or because they believe that the duty is no longer necessary because the Canadian producer has closed down, or request a review if they have reasonable grounds that new facts have arisen or there has been a change in circumstances that led to the imposition of the duty. While the issues in a review are case-specific, the question the CITT must answer is whether the amendment to the scope of the goods subject to the duty order would cause injury to the Canadian producer. If the answer is yes, the CITT will not change the duty and will continue to impose it for the full five years. The duty order may be terminated early during this review period.

Final Review

The duty order will expire after five years unless the CITT conducts an investigation to determine whether the duty order is still necessary. The CITT and CBSA conduct the investigation together (as in the initial investigation). The CITT’s preliminary investigation begins at least 2 months before the duty expires. The CITT will consider the evidence and arguments from interested parties to determine whether a review is warranted (i.e., there is reasonable evidence that the termination of the duty would harm Canadian producers in the short to medium term). If the CITT concludes that a review is warranted, the CBSA has 150 days to determine whether the termination of the duty is likely to lead to a continuation or recurrence of dumping/subsidy. Once the CBSA determines that this is likely, the CITT has approximately 160 days to conduct a final investigation to determine whether the termination of the duty is likely to cause injury to Canadian producers. SIMA provides as follows: The CITT first considers how the international and domestic markets have changed over the past 5 years. The CITT then considers how Canadian producers would fare if the duty were continued. Finally, the CITT analyzes what would happen if the duties were removed, specifically how the dumped/subsidized imports would affect Canadian producers in the future. If the CITT concludes that the removal of the duties would likely harm Canadian producers, the duties would continue for another five years.

c. Safeguards

Unlike anti-dumping and countervailing duties, safeguards are often referred to as a tool to protect domestic producers of like or directly competitive goods in an emergency to limit the adverse effects that cause serious injury to domestic production due to an unusual increase in imports.

In October 2018, the Government of Canada imposed temporary safeguards for 200 days on certain imported steel products. At the same time, the Government requested the Canadian International Trade Tribunal (CITT) to conduct an investigation to determine whether the final safeguard measures are warranted and, if so, to recommend appropriate trade remedies.

In April 2019, the CITT issued a final notice of application of safeguard measures on certain stainless steel sheet and wire products.

d. Measures to prevent circumvention of antidumping and countervailing measures

Circumvention occurs when trade and business activities are changed to avoid the payment of anti-dumping and countervailing duties under SIMA. The CBSA will initiate anti-circumvention investigations when there is sufficient evidence. An anti-circumvention investigation aims to eliminate the circumvention of an existing duty order. If a formal CBSA investigation determines that circumvention has occurred, duties will be extended to the circumvented goods.

Anti-circumvention investigations may be initiated as a result of a request or initiated by the CBSA itself.

Request

In general, an anti-circumvention investigation is initiated upon the receipt of a formal request. The request, together with other administrative information, must provide information to support the allegations of circumvention, to the extent that the information is available to the claimant. For specific details on how to submit a request, please refer to the Guide to Submitting a Request on the CBSA website.

Initiation

A decision on whether to initiate an anti-circumvention investigation must be made within 45 days of receiving the application. If the CBSA considers that there is evidence that circumvention is occurring, based on the prescribed anti-circumvention factors, the CBSA will initiate an investigation. The decision to initiate may be made in respect of some or all of the goods identified in the application. Similarly, an investigation may relate specifically to certain goods from a country. The CBSA will determine how an investigation is initiated and will depend on the circumstances of each case.

If the CBSA decides not to initiate, all actions in relation to the application are terminated. The CBSA will notify the applicant and provide reasons for its decision.

Upon initiation, a Request for Information (RFI) (questionnaire) will be sent to importers, exporters, suppliers and manufacturers of the foreign goods under investigation and Canadian manufacturers of like goods to obtain the information required for the investigation. The questionnaire is accompanied by General Guidance to assist parties in preparing the required information, which identifies the period of the investigation and explains the information to be provided for specific situations, as well as the rules for handling, using and disclosing confidential information.

Anti-circumvention Investigation Timeline

A sample timeline for key milestones in an anti-circumvention investigation is provided below. This timeline may be modified depending on the circumstances of a particular investigation. The timeline of events in a particular investigation will be published on the CBSA website upon initiation and will be updated as required.

The CBSA will make a determination regarding circumvention, based on the prescribed anti-circumvention factors, within 180 days of initiating the investigation. In certain circumstances, such as when complex or novel issues arise, the CBSA may extend its determination to 240 days.

When the CBSA makes a determination that circumvention has occurred, it will notify the CITT. The CITT will in turn amend the original duty order to include the circumvented goods and thereby extend the anti-dumping and countervailing duties to those goods.

The CBSA may also make a partial determination regarding circumvention, that is, a determination that only some of the goods under investigation are circumventing the duty order. For example, when an investigation is initiated into goods from a country, the CBSA may decide that the importation of goods from exporter A constitutes circumvention but that the importation of goods from exporter B does not constitute circumvention.

After the CITT has modified the duty order, the anti-dumping or countervailing duty is payable on dumped or subsidized goods of the same description on or after the date of initiation of the anti-circumvention investigation and on all shipments of the goods cleared after the date of the CITT modification of the duty order. The anti-dumping/countervailing duty remains in effect until the duty order is modified or revoked or expires.

If the CBSA decides that some or all of the goods concerned have not circumvented the duty order, the anti-dumping/countervailing duty will not be extended to those goods.

During the investigation, evidence may be discovered that the goods under investigation are, in fact, covered by a duty order. When considering whether goods are covered by a duty order, the CBSA will consider the factors specified in the scope rulings.

If the goods are covered by a duty order, the CBSA will terminate the anti-circumvention investigation, before publishing a statement of essential facts, and will provide reasons for terminating the investigation, including the reasons for determining that the goods are covered by a duty order. Pursuant to subsection 75(4), this decision to terminate the investigation is a scope ruling. For further information on scope rulings, please refer to the Scope Case Information

Intra-period review

The CBSA may conduct a period review of a determination of circumvention. This review may be necessary where there is a change in the circumstances on which the investigating authority based its circumvention determination. Upon completion of the review, the CBSA will either vacate or uphold the decision (with or without amendment) as appropriate. If requested, the CITT will also amend the duty order accordingly.

Exclusion Review

In limited circumstances, it is possible that exporters whose goods are subject to an extension of the duty order may not have had the opportunity to participate in the anti-circumvention investigation because they were not notified. Exporters who can demonstrate that their goods are not circumventing the duty order may apply for an exclusion from the extension of the duty order due to the anti-circumvention investigation. The CBSA will initiate an exclusion review where sufficient evidence is available.

The relevant goods imported from the exporter who made the exclusion request will be assessed the anti-dumping/counterfeiting duty rate during the exclusion review.