Order Amending the Order Imposing a Surtax on the Importation of Certain Steel Goods (Final Safeguards): SOR/2019-127
Canada Gazette, Part II, Volume 153, Number 11
Registration
SOR/2019-127 May 9, 2019
CUSTOMS TARIFF
P.C. 2019-474 May 9, 2019
Whereas on April 3, 2019, the Canadian International Trade Tribunal submitted its report to the Governor in Council, pursuant to the Order Referring to the Canadian International Trade Tribunal, for Inquiry into and Reporting on, the Matter of the Importation of Certain Steel Goods footnote a ;
And whereas the Governor in Council is satisfied, on the basis of the inquiry made by the Canadian International Trade Tribunal, that certain goods described in the schedule to that Order are being imported under such conditions as to cause or threaten serious injury to domestic producers of like or directly competitive goods;
Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 55(1) and paragraph 56(1)(b) of the Customs Tariff footnote b, makes the annexed Order Amending the Order Imposing a Surtax on the Importation of Certain Steel Goods (Final Safeguards).
Order Amending the Order Imposing a Surtax on the Importation of Certain Steel Goods (Final Safeguards)
Amendments
1 Sections 1 to 3.1 of the Order Imposing a Surtax on the Importation of Certain Steel Goods footnote 1 are replaced by the following:
Origin of goods
1 For the purposes of this Order, the origin of the goods is determined in accordance with the rules of origin set out in the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations or the Determination of Country of Origin for the Purpose of Marking Goods (Non-NAFTA Countries) Regulations, as the case may be.
Application
2 (1) Subject to subsections (2) to (4), this Order applies to goods that are imported from all countries.
Exception
(2) This Order does not apply to goods originating in Canada.
Exception
(3) This Order does not apply to goods originating in Chile, Colombia, Mexico, Panama, Peru, Korea, the United States or Israel or another CIFTA beneficiary.
Exception
(4) This Order does not apply to goods originating in a World Trade Organization Member country that benefits from the General Preferential Tariff, as long as its share of importation of the goods of the class in question does not exceed 3% of the total importation of goods of that class, provided that the importation of goods of that class from all such countries with less than 3% import share does not collectively account for more than 9% of the total importation of the goods of that class.
Surtax
3 (1) Goods of a class set out in column 1 of the Schedule, and meeting the description set out in column 2, that are imported in excess of the quantity for that class set out to in column 4 during a period set out in column 3 are subject to a surtax at the rate specified in column 5 of their value for duty, the value for duty being determined in accordance with sections 47 to 55 of the Customs Act.
Permit
(2) For the purposes of subsection (1), the goods of a class are considered to be imported in excess of the quantity referred to in that subsection if they are not imported under a permit that is issued under the Export and Import Permits Act in respect of section 82 of the Import Control List and valid at the time at which the goods are accounted for under subsection 32(1), (3) or (5) of the Customs Act.
2 Schedules 1 and 2 to the Order are replaced by the Schedule set out in the Schedule to this Order.
Coming into Force
3 This Order comes into force on May 13, 2019, but if it is registered after that day, it comes into force on the day on which it is registered.
SCHEDULE
(Section 2)
SCHEDULE
(Subsection 3(1))
| Item |
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
|---|---|---|---|---|---|
1 |
Heavy Plate |
Hot-rolled carbon steel plate and high-strength low-alloy steel plate not further manufactured than hot-rolled, heat-treated or not, in widths from 80 inches (± 2,030 mm) to 152 inches (± 3,860 mm), and thicknesses from 0.375 inches (± 9.525 mm) to 4.0 inches (101.6 mm), with all dimensions being plus or minus allowable tolerances contained in the applicable standards. For greater certainty, these dimensional restrictions apply to steel plate, that contains alloys greater than required by recognized industry standards provided that the steel does not meet recognized industry standards for an alloy-specification steel plate. The following goods are excluded:
|
Period 1. The period of one year beginning on the day of the coming into force of section 1. |
100,000 |
20% |
Period 2. The period of one year beginning on the day after the day on which Period 1 ends. |
110,000 |
15% |
|||
Period 3. The period of one hundred and sixty-five days beginning on the day after the day on which Period 2 ends. |
54,699 |
10% |
|||
2 |
Stainless Steel Wire |
Cold drawn and cold drawn and annealed, stainless steel round wire, up to 0.256 inches (6.50 mm) in maximum solid cross-sectional dimension; and cold drawn, and cold drawn and annealed, stainless steel cold-rolled profile wire, up to 0.031 square inches (0.787 sq. mm) in maximum solid cross-sectional area. |
Period 1. The period of one year beginning on the day of the coming into force of section 1. |
2,800 |
25% |
Period 2. The period of one year beginning on the day after the day on which Period 1 ends. |
3,080 |
15% |
|||
Period 3. The period of one hundred and sixty-five days beginning on the day after the day on which Period 2 ends. |
1,532 |
5% |
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the orders.)
Issues
In October 2018, following the imposition of provisional safeguards, the Government of Canada directed the Canadian International Trade Tribunal (CITT) to conduct an inquiry into whether imports of seven steel product categories have caused, or threaten to cause, serious injury to Canadian steel producers.
On April 3, 2019, the CITT issued its findings that increased imports of heavy plate and stainless steel wire are threatening to cause serious injury to Canadian producers of those goods. Therefore, the CITT recommended the imposition of final safeguard measures in order to remedy the threat of serious injury caused by imports of those products.
Background
Global safeguards are trade measures that may be imposed, pursuant to the World Trade Organization (WTO) Agreement on Safeguards, to address situations where an increase in imports is causing, or threatening to cause, serious injury to domestic producers of like goods. Unlike anti-dumping and countervailing duties, global safeguards address injury caused by fairly traded goods (i.e. not dumped or unfairly subsidized). They apply to all sources of imports, unless obligations under free trade agreements provide an exclusion for trading partners from global safeguard measures.
In Canada, global safeguard measures are imposed pursuant to the Customs Tariff by the Governor in Council, on the recommendation of the Minister of Finance, if there is evidence that an increase in imports has caused, or threatens to cause, serious injury to domestic producers. Final safeguards may be imposed on the basis of an inquiry conducted by the CITT pursuant to the Canadian International Trade Tribunal Act that finds that goods are being imported in such conditions to cause or threaten serious injury to domestic producers.
On October 11, 2018, the Government announced the imposition of provisional safeguards on steel products in seven product categories, effective October 25, 2018, through the Order Imposing a Surtax on the Importation of Certain Steel Goods. footnote 2 The steel product categories subject to provisional safeguards include heavy plate, concrete reinforcing bar (rebar), energy tubulars, hot-rolled sheet, pre-painted steel, stainless steel wire and wire rod. At the same time, the Government also directed the CITT to inquire into whether longer-term final safeguards were warranted and, if so, to recommend appropriate remedies to the Government.
In accordance with the terms of reference issued by the Governor in Council, the CITT issued its findings and recommendations on April 3, 2019. The CITT’s inquiry concluded that
- final safeguards are not warranted on imports of rebar, energy tubular products, hot-rolled sheet, pre-painted steel and wire rod; and
- final safeguards are warranted on imports of heavy plate and stainless steel wire.
Therefore, the CITT recommended the imposition of a remedy, in the form of tariff-rate quotas (TRQ) over a three-year period, on imports of heavy plate and stainless steel wire other than goods originating in the United States, Mexico, Chile, Israel and another Canada-Israel Free Trade Agreement (CIFTA) beneficiary, Korea, Panama, Peru, Colombia, Honduras, and countries whose goods are eligible for treatment under the General Preferential Tariff. The TRQs recommended by the CITT are progressively liberalized each year.
The CITT also recommended that the Government consider alternative methods of quota allocation, other than a first-come, first-served approach, in order to give importers more certainty on their imports.
For product categories on which the CITT has recommended the imposition of final safeguards, the Government has discretion to impose final safeguards as recommended by the CITT, to impose final safeguards in a modified form, or not to impose final safeguards.
Objective
The objective of these two orders is to implement the recommendations of the CITT in order to remedy the threat of serious injury to domestic producers of heavy plate and stainless steel wire caused by increased imports.
Description
Order Amending the Order Imposing a Surtax on the Importation of Certain Steel Goods (Final Safeguards)
The Order Amending the Order Imposing a Surtax on the Importation of Certain Steel Goods (Final Safeguards) [the Surtax Order] amends the Order Imposing a Surtax on the Importation of Certain Steel Goods in order to impose a surtax on the importation of heavy plate and stainless steel wire that exceed the volume determined by the CITT to be non-injurious to domestic producers.
The following trading partners are excluded from the application of final safeguards: the United States, Mexico, Chile, Israel or another CIFTA beneficiary, Korea, Colombia, Peru, Panama and countries benefitting under the General Preferential Tariff (including Honduras).
The volume of the surtax-free quota and the surtax rate for imports exceeding the quota in each period of the final safeguard is as follows:
Heavy Plate |
|||
|---|---|---|---|
Year |
Duration |
Quota Volume (tonnes) |
Over-Quota Surtax (%) |
1 |
366 days |
100 000 |
20 |
2 |
365 days |
110 000 |
15 |
3 |
165 days |
54 699 |
10 |
Stainless Steel Wire |
|||
|---|---|---|---|
Year |
Duration |
Quota Volume (tonnes) |
Over-Quota Surtax (%) |
1 |
366 days |
2 800 |
25 |
2 |
365 days |
3 080 |
15 |
3 |
165 days |
1 532 |
5 |
The final safeguard is identical to what was recommended by the CITT, with one exception. Under WTO rules and domestic law, safeguard measures that exceed three years (including any provisional safeguards) are required to undergo a mid-term review, which could lead to a premature termination of the final safeguards. By limiting the aggregate duration of the safeguard measure to three years, such a mid-term review would not be necessary. As a result, the duration of the final safeguard measure in the third year is reduced to 165 days, and the surtax-free quota for that year has been prorated accordingly.
In order for subject goods imported into Canada to benefit from the surtax-free quota, a valid shipment-specific import permit in respect of item 82 of the Import Control List must be presented at the time of final accounting. Steel goods subject to final safeguards are listed as item 82 on the Import Control List in order to allow the Government to track the volume of subject imports into Canada to ensure that they do not exceed the quantities specified in the Surtax Order.
Order Amending the Import Control List
The Order Amending the Import Control List (the ICL Order) amends item 82 of the Import Control List to align the scope of that item with the steel products subject to final safeguards (i.e. heavy plate and stainless steel wire). This amendment is required to facilitate the administration of the TRQ established in the Surtax Order.
Regulatory development
Consultation
The purpose of referring the matter of final safeguards to the CITT for inquiry was to allow the Government to be informed by the impartial and independent advice rendered by the CITT following a transparent inquiry.
In this regard, the CITT’s findings and recommendations followed a 175-day inquiry that involved 119 participants, including domestic producers, trade unions, importers, downstream users, foreign producers, provincial governments, and foreign governments. The evidence underpinning the CITT’s analysis was based on 327 questionnaire responses submitted by domestic producers, importers and foreign producers of the steel goods subject to the inquiry, which provided the CITT with access to confidential trade and financial information. As well, public hearings, which included public and confidential testimony by witnesses, were held by the CITT in January 2019.
Modern treaty obligations and Indigenous engagement and consultation
Constitutional and modern treaty obligations were considered and none have been identified.
Instrument choice
Section 55 of the Customs Tariff provides that the Governor in Council may, by order, impose safeguard measures on the recommendation of the Minister of Finance. In addition, pursuant to paragraph 56(1)(b) of the Customs Tariff, the Governor in Council may amend an order imposing safeguards at any time, on the recommendation of the Minister of Finance.
Section 6 of the Export and Import Permits Act provides the authority for the Governor in Council to amend the Import Control List.
Regulatory analysis
Costs and benefits
In October 2018, the Government asked the CITT to inquire into whether imports of seven steel products may cause harm to Canadian steel workers and producers. At the same time, the Government imposed provisional safeguards for 200 days in order to stabilize the Canadian steel market while the CITT conducted its inquiry.
In this context, the orders implement the CITT’s recommendations that final safeguards are warranted on imports of heavy plate and stainless steel wire from subject countries. As recommended by the CITT, the TRQs established by the orders balance the interests of domestic producers and downstream users of heavy plate and stainless steel wire. Specifically, the TRQ volumes and over-quota surtax rates are intended to remove the threat of serious injury to the domestic producers from increased imports, while, at the same time, minimizing the costs to the Canadian economy.
Similar to the administration of the provisional safeguards, businesses wishing to import heavy plate or stainless steel wire without paying surtaxes may do so by obtaining a shipment-specific import permit from Global Affairs Canada (GAC). Although there are costs associated with permit fees and customs brokerage fees, ranging from $10 to $31 per permit, as prescribed under the Export and Import Permits and Certificates Fees Order (SOR/95-245), the surtax savings to importers will far outweigh the costs associated with obtaining import permits. The permit and customs brokerage fees are not incremental to the fees for obtaining a shipment-specific import permit during the provisional safeguard period.
In response to concerns raised regarding the administration of provisional safeguards, and in line with the CITT’s recommendation, the Government intends to administer the final safeguard TRQs through importer-specific allocation of quotas. This approach will further minimize the impact on importers and downstream users of heavy plate and stainless steel wire.
Small business lens
No costs are imposed on small businesses as a result of the Surtax Order and the ICL Order.
“One-for-One” Rule
The “One-for-One” Rule does not apply to the Surtax Order and ICL Order, since they do not result in any change in the administrative burden for Canadian businesses. Under the provisional safeguards, importers seeking to import subject goods on a surtax-free basis are required to present a shipment-specific import permit issued by GAC at the time of final accounting. This requirement is maintained for the final safeguards imposed by the orders.
Regulatory cooperation and alignment
The orders are not related to a work plan or commitment under a formal regulatory cooperation forum.
Strategic environmental assessment
In accordance with The Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that the orders would not result in positive or negative effects on the environment; therefore, a strategic environmental assessment is not required.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for the orders.
Implementation, compliance and enforcement, and service standards
The Canada Border Services Agency (CBSA) and GAC will be responsible for administering the Surtax Order. The CBSA is responsible for administering the Customs Tariff and related regulations. GAC is responsible for administering the import permits regime, under the Export and Import Permits Act, including the issuance of import permits and import quota allocations.
In the course of administering the Surtax Order, the CBSA and GAC will provide administrative guidance to the importing community through the issuance of Customs Notices and Notices to Importers, respectively.
Contacts
Alan Ho
International Trade Policy Division
Department of Finance Canada
Ottawa, Ontario
K1A 0G5
Telephone: 613‑369‑4022
Gregory Cederwall
Trade and Export Controls Bureau
Global Affairs Canada
Ottawa, Ontario
K1A 0G2
Telephone: 343‑203‑4359