Fabricated Industrial Steel Components Anti-dumping and Countervailing Duty Remission Order: SOR/2019-297
Canada Gazette, Part II, Volume 153, Number 17
SOR/2019-297 August 8, 2019
P.C. 2019-1189 August 7, 2019
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 115 footnote a of the Customs Tariff footnote b, makes the annexed Fabricated Industrial Steel Components Anti-dumping and Countervailing Duty Remission Order.
Fabricated Industrial Steel Components Anti-dumping and Countervailing Duty Remission Order
1 For the purpose of this Order, fabricated industrial steel components means subject goods as defined in paragraph 9 of the Statement of Reasons that the Canadian International Trade Tribunal issued on June 9, 2017 in Inquiry Number NQ-2016-004.
2 (1) Subject to subsection (2), remission is granted of the anti-dumping and countervailing duties paid or payable under the Special Import Measures Act in respect of fabricated industrial steel components contained in modules imported into Canada for use in
- (a) the LNG Canada Development Inc. project located near Kitimat, British Columbia; or
- (b) the Woodfibre LNG Limited project located near Squamish, British Columbia.
(2) The remission is granted if
- (a) a claim for remission is made to the Minister of Public Safety and Emergency Preparedness within two years after the date of importation; and
- (b) the claimant, on request, provides the Canada Border Services Agency with evidence demonstrating eligibility for remission .
Coming into force
3 This Order comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
Anti-dumping duties on imports of fabricated industrial steel components (FISC) from China, South Korea and Spain, and countervailing duties on imports of FISC from China, have been in place since May 2017. LNG Canada Development Inc. (LNG Canada) and Woodfibre LNG Limited (Woodfibre LNG) have raised concerns regarding the impact that these duties may have on the costs of planned liquefied natural gas (LNG) projects, and have requested the remission of duties payable on FISC that is incorporated in modules used in LNG projects.
Anti-dumping and countervailing (anti-subsidy) duties address instances where unfairly traded (i.e. dumped or unfairly subsidized) imports injure Canadian producers. Dumping occurs when a manufacturer exports a product to another country at a price either below the price charged in its home market or below its cost of production. When dumping occurs, anti-dumping duties may be imposed to increase the prices of imported goods to a level that reflects non-dumped prices. Unfair subsidization occurs when foreign producers benefit from certain types of government financial assistance. When unfair subsidization occurs, countervailing duties may be imposed to offset the effects of subsidization by a foreign government.
In Canada, anti-dumping and countervailing duties may be imposed pursuant to the Special Import Measures Act (SIMA) following investigations by the Canada Border Services Agency (CBSA), which determines whether imports were dumped and/or subsidized, and the Canadian International Trade Tribunal (CITT), which determines whether such imports injured Canadian producers. These investigations are conducted in an independent, impartial and transparent manner. Duties imposed under SIMA are generally referred to as SIMA duties.
In May 2017, anti-dumping duties of up to 45.8% were imposed on imports of FISC from China, South Korea and Spain, as well as countervailing duties of up to 11,656 renminbi per tonne were imposed on imports of FISC from China. These duties were imposed following determinations by the CBSA and the CITT that the dumping and subsidizing of FISC had caused injury to domestic producers.
FISC are structural steel components used in the construction industry to support frameworks and integrated basic processing equipment. The Canadian FISC industry is composed of 16 producers with approximately 2 000 employees.
In fall 2017, LNG Canada and Woodfibre LNG requested the remission of anti-dumping and countervailing duties applied to imports of FISC contained in modules used for the construction of their respective LNG projects. LNG Canada is a joint venture between Shell Canada, PetroChina, Petronas, Mitsubishi and Korean Gas Company (KOGAS) to build and operate a $40 billion LNG liquefaction facility and marine export terminal in Kitimat, British Columbia. Woodfibre LNG is a privately held subsidiary of Pacific Oil and Gas Limited (Singapore) proposing to build and operate a $1.6 billion LNG liquefaction facility and marine export terminal near Squamish, British Columbia.
In their requests for remission, the two requesters claimed that there is no Canadian capacity to produce the modules containing FISC of a size and complexity required by the LNG Canada and Woodfibre LNG projects. In addition, the requesters have raised concerns that the cost impact of the anti-dumping and countervailing duties could have a negative impact on investment decisions related to the projects.
The objective of the Order is to relieve LNG Canada and Woodfibre LNG from anti-dumping and countervailing duties on FISC contained in modules used in their respective LNG projects.
The Order remits anti-dumping and countervailing duties applicable on imports of FISC contained in modules for use in the LNG Canada and Woodfibre LNG projects. Remission would be granted on the condition that the importer provides the CBSA with documentation that demonstrates that the importer is entitled to such a remission under the Order.
The scope of remission is specific to these two projects, in light of their particular requirements for modules containing FISC.
The Government consulted stakeholders in the Canadian steel sector, including the Canadian Institute of Steel Construction (CISC), which represents domestic FISC producers, and the Canadian Steel Producers Association (CSPA). The CISC opposes remission, as they allege that there is domestic production capacity for FISC that could be incorporated into modules used in LNG project construction, or that the LNG projects could be constructed using smaller-sized modules or built on site through a non-modular approach. Further, the CISC and the CSPA oppose remission, given concerns that it could undermine the protection afforded under SIMA, and as there are other available mechanisms in the trade remedies system to seek relief from duties (e.g. reviews by the CITT and the CBSA).
The alternative approaches raised by the CISC were considered impractical by LNG Canada and Woodfibre LNG, as they would significantly increase project costs and uncertainties, and the larger construction footprint required could be inconsistent with existing environmental approvals.
In addition, the Government consulted potential module fabricators in Canada to determine domestic capacity to produce modules required for the LNG projects. Based on these consultations, there does not currently appear to be domestic capacity to produce modules of the size and complexity required for the construction of these LNG projects.
Modern treaty obligations and Indigenous engagement and consultations
Consultations with Indigenous groups regarding the LNG Canada and Woodfibre LNG projects have been undertaken by the Government of British Columbia on behalf of the Crown. However, the Order does not impact Indigenous groups, as it only relieves anti-dumping and countervailing duties applicable on FISC contained in modules used in project construction for two companies.
Section 115 of the Customs Tariff provides the authority for the Governor in Council to remit anti-dumping and countervailing duties on the recommendation of the Minister of Finance.
While the remission authority under section 115 of the Customs Tariff is broad, it is not used to override the legislated intent of SIMA, which is to remedy the injury caused by dumped goods to domestic producers of competing goods. Remission of SIMA duties is typically only used in extraordinary circumstances, such as pursuant to a public interest inquiry by the CITT (where it has been determined that application of the duties in their full amount would not be in the public interest) or if there is short supply domestically.
Costs and benefits
Direct and indirect impacts
This Order provides relief from anti-dumping and countervailing duties applicable on imports of FISC contained in modules for use in the construction of the LNG Canada and Woodfibre LNG projects. The exact amount of relief that this Order will provide is uncertain, given that required importations for the projects are not finalized, and potential duties that would apply in the absence of this Order could vary depending on potential reviews to the trade remedy measures. The relief will contribute to supporting the development of the Canadian LNG sector, which may facilitate diversification of Canada’s resource trade, continued economic growth and the creation of new jobs.
This Order may result in additional administrative burden, as importers may be required, upon request by the CBSA, to provide evidence to demonstrate eligibility for remission. However, any such administrative burden is expected to require minimal incremental effort.
In light of the current apparent short supply in Canada of FISC-containing modules of the size and complexity used for the construction of the LNG Canada and Woodfibre LNG projects, it is expected that remission would not undermine the protection afforded under SIMA.
Significance of the LNG projects for the Canadian economy
LNG Canada’s $40 billion project represents the largest private-sector investment in the history of Canada. The LNG Canada project is anticipated to create 7 500 jobs during construction, lead to significant direct government revenues and promote economic growth in British Columbia and across Canada. Likewise, Woodfibre LNG’s $1.6 billion project is anticipated to create 650 jobs during construction and contribute significantly to the Canadian construction sector. It is also expected that these projects will benefit the Canadian steel sector through the procurement of Canadian steel for certain elements of the projects (such as pipelines, wells and casings and structural steel for non-process buildings). The long-term operations of these projects would continue to benefit the Canadian economy after construction is complete.
Small business lens
This Order would benefit LNG Canada and Woodfibre LNG, two large corporations. The small business lens does not apply to this Order, as it would not result in costs or benefits for small businesses.
The Order is exempted from the requirement to offset administrative burden under the “One-for-One” Rule, as it is related to tax and tax administration.
Since remission would only apply to future importations, importers claiming remission on a prospective basis (i.e. waiving duties at the time of importation after the Order comes into effect) would do so for each applicable importation as part of the process of completing existing customs documentation requirements. In addition, the importer may be required to provide the CBSA with the necessary documentation to substantiate eligibility for remission.
Regulatory cooperation and alignment
The Order is not related to a work plan or commitment under a formal regulatory cooperation forum.
Strategic environmental assessment
Environmental assessments were conducted for the LNG Canada and Woodfibre LNG projects in accordance with the terms of the Canadian Environmental Assessment Act, 2012, and environmental assessment decisions were subsequently made by the Minister of the Environment in respect of each project. The Order does not result in substantive changes to the nature of these projects, as it only relieves anti-dumping and countervailing duties applicable on FISC contained in modules used in project construction. Therefore, a strategic environmental assessment was not conducted in respect of this Order.
Gender-based analysis plus
No gender-based analysis plus (GBA+) impacts have been identified for this Order.
Implementation, compliance and enforcement, and service standards
The CBSA will assess any requests for remission made under the Order and will ensure compliance with its terms and conditions in the normal course of its administration of customs and tariff-related legislation and regulations.
International Trade Policy Division
Department of Finance Canada