Order Amending the Import Control List: SOR/2020-221
Canada Gazette, Part II, Volume 154, Number 22
SOR/2020-221 October 6, 2020
EXPORT AND IMPORT PERMITS ACT
P.C. 2020-773 October 2, 2020
Whereas the Governor in Council deems it necessary to control the import of steel products for the purposes of implementing the Joint Statement by Canada and the United States on Section 232 Duties on Steel and Aluminum;
Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Foreign Affairs, pursuant to paragraph 5(1)(e) and section 6 footnote a of the Export and Import Permits Act footnote b, makes the annexed Order Amending the Import Control List.
Order Amending the Import Control List
1 Items 80 and 81 of the Import Control List footnote 1 are replaced by the following:
80 Carbon steel products including semi-finished products (ingots, blooms, billets, slabs and sheet bars), plate, sheet and strip, wire rods, wire and wire products, railway-type products, bars, structural shapes and units, pipes and tubes, but excluding the specialty steel products referred to in item 81.
81 Specialty steel products: stainless steel flat-rolled products (sheet, strip and plate), stainless steel bar, stainless steel pipe and tube, stainless steel wire and wire products, stainless steel in ingots or other primary forms, semi-finished products of stainless steel, alloy tool steel, mold steel and high-speed steel.
Coming into Force
2 This Order comes into force on November 2, 2020, but if it is registered after that day, it comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
On March 8, 2018, the United States announced that it would impose tariffs on steel and aluminum imported from all countries, citing national security concerns. Canada was initially exempted from these tariffs. However, on May 31, 2018, the United States announced that the tariffs under Section 232 of the Trade Expansion Act of 1962 would also apply to Canada. Accordingly, tariffs of 25% on steel and 10% on aluminum imported from Canada were applied starting June 1, 2018. In response to the application of these U.S. tariffs, on June 29, 2018, the Government of Canada announced that Canada would impose countermeasures effective July 1, 2018. In addition, Canada initiated dispute settlement proceedings at the World Trade Organization (WTO) and under the North American Free Trade Agreement (NAFTA) dispute settlement provisions challenging the Section 232 tariffs.
On May 17, 2019, in the Joint Statement by Canada and the United States on Section 232 Duties on Steel and Aluminum (the Joint Statement), the United States agreed to eliminate the tariffs imposed under Section 232 on imports of steel and aluminum from Canada. Likewise, Canada agreed to eliminate all tariffs imposed in retaliation to the Section 232 tariffs. Both Canada and the United States also agreed to terminate all pending litigation between them in the WTO regarding the Section 232 action. In turn, Canada and the United States agreed to establish an agreed-upon process for monitoring aluminum and steel trade between them. Canada and the United States further committed to prevent imports of aluminum and steel that is unfairly subsidized and/or sold at dumped prices as well as the transshipment of aluminum and steel made outside of Canada or the United States to the other country.
Global Affairs Canada (GAC) has long-standing experience in monitoring steel imports. Since September 1, 1986, steel products have been added to the Import Control List (ICL) for the purpose of facilitating the collection of steel import information, on the basis that steel is traded in world markets in circumstances of surplus supply and depressed prices and that a significant proportion of world trade in steel is subject to control through the use of non-tariff measures. As such, a permit is required to import those steel products into Canada. General Import Permits (GIPs) are currently in place allowing all Canadian residents to import any of those steel products, subject to the terms and conditions of the permits. Following the Joint Statement, in August 2019, Canada added a reporting and record-keeping requirement as a term and condition to GIPs No. 80 and No. 81 for importing certain steel goods included in the ICL in order to enhance the reliability of the data. Effective September 1, 2019, Canada also established an Aluminum Import Monitoring Program similar to the Steel Import Monitoring Program. The steel ICL listings that enable the current Steel Import Monitoring Program (the Program) will be deemed to be removed from the ICL on November 1, 2020. The Order will re-add the steel items that are subject to the Program on the ICL for the purpose of continuing to implement the Joint Statement.
Import monitoring of steel products began on September 1, 1986, on the recommendation of the then-Canadian Import Tribunal (CIT). The CIT conducted an inquiry into conditions in the steel trade and found that overcapacity, widespread subsidization and prevalence of dumping represented a threat of injury to the domestic industry. The Tribunal recommended import monitoring in these circumstances. As a result, carbon steel products, followed by specialty steel products, were added to the ICL for the purpose of collecting steel import information pursuant to subsection 5.1(1) of the Export and Import Permits Act (EIPA). The ICL, a regulation under the EIPA, lists goods over which Canada imposes import controls. The Governor in Council has the authority to revoke, amend, vary or re-establish the ICL.
The Program enables GAC to provide weekly aggregate data to the public on the type, quantity, and value of steel imports. Since the adverse conditions identified by the CIT have persisted, items 80 and 81 have repeatedly been re-added to the ICL for two- or three-year periods pursuant to subsection 5.1(1) of the EIPA. These items were last re-added to the ICL in 2017 (SOR/2017-230) and, pursuant to subsection 5.1(1), will be deemed removed from the ICL on November 1, 2020, three years from the day on which they were included on the ICL. Such items must, therefore, be re-added to the ICL every three years in order for the Program to continue. While ICL items 80 and 81 could be re-added pursuant to subsection 5.1(1), the Order re-adds the steel products currently on the ICL for the purpose of implementing the Joint Statement, pursuant to paragraph 5(1)(e). Products added to the ICL pursuant to this authority are not subject to subsection 5.1(2) and, therefore, are not subject to a prescribed end date, which will enable the Program to continue without these products having to be re-added to the ICL. If the Joint Statement is ever modified or rescinded, subsection 5.1(1) will continue to be available to re-add these items to the ICL to ensure the continuation of the Program. Paragraph 5(1)(e) was also used to add aluminum products to the ICL on September 1, 2019, which enabled the establishment and administration of the Aluminum Import Monitoring Program.
Import monitoring is an important aspect of the Joint Statement, as it provides early warning of increased imports of steel and aluminum into Canada, which could indicate that foreign producers are dumping products into Canada or transshipping products through Canada to evade U.S. Section 232 tariffs. The Canadian steel industry requires the most up-to-date information available on the nature, volume, price and origin of steel imports in order to provide early warning of potential dumping situations. Import data gathered through the Program and provided to the industry via weekly web publications is the timeliest source available in Canada on these elements. There are currently no alternative sources of equivalent steel import statistics. Similar information from Statistics Canada is delayed by six weeks.
The objective of this regulatory measure is to implement Canada’s commitments set out in the Joint Statement with respect to monitoring of steel trade.
The Order does not make any change to the products currently covered by the ICL, or monitored under the Program. No new product categories will be controlled, and therefore monitored. The language of item 81 on the ICL is, however, being clarified, and a different legal authority (i.e. paragraph 5(1)(e) of the EIPA) is being used to add the steel products to the ICL to facilitate the continuation of the Program.
Not re-adding the steel items that enable the administration of the Program to the ICL by November 2, 2020, would stop the flow of information to the Canadian steel industry and remove a valuable early-warning mechanism to detect dumping of products on the Canadian market. This early warning allows industry to request that the Canada Border Services Agency (CBSA) institute an investigation leading potentially to the imposition of duties on the offending imports in order to level the playing field for Canadian producers. Failure to re-add the steel items to the ICL would also undermine Canada’s international commitments in the Joint Statement to conduct steel import monitoring.
The Order Amending the Import Control List includes carbon and specialty steel products on the ICL upon the Order taking effect in order to implement Canada’s commitments set out in the Joint Statement with respect to monitoring of steel trade.
The Government of Canada consulted with steel producers, and the Canadian Steel Producers Association (CSPA) and its members, on the implementation of the commitments in the Joint Statement and the continuation of the Program. The Canadian steel industry supports the view that maintaining steel products on the ICL would demonstrate Canada’s serious commitment to implementing the provisions set out in the Joint Statement. Canadian steel producers have been consistently consulted concerning the existence and operation of the Program within the context of the Steel Industry-Government Trade Working Group co-chaired by Finance Canada and the CSPA.
Global Affairs Canada representatives also meet regularly with the CSPA. All CSPA members were invited to submit their views, in writing, with respect to the prospective continuation of the Program.
Modern treaty obligations and Indigenous engagement and consultation
Constitutional and modern treaty implications were considered, and none have been identified.
The only instrument available to meet the monitoring commitment in the Joint Statement is an Order made under the Export and Import Permits Act.
Benefits and costs
The costs related to the administration of the Steel Import Monitoring Program require incremental resources of three additional full-time equivalents (FTEs) within the Trade Policy and Negotiations Branch. These FTEs would be responsible for reviewing steel import data, working with the CBSA and Statistics Canada for correcting any errors, and making steel import data publicly available.
With respect to industry, the Order imposes no additional administrative burden for steel importers, as GAC has had a Steel Import Monitoring Program in place since 1986, and the Order does not make any changes to the current Program.
Prior to 2012, there was a greater administrative burden, as importers were required to apply for individual permits for each shipment and pay the permit cost, ranging from $15 to $31 per permit (dependent on the value of the import). The requirement for individual permits was eliminated in 2012 and, since then, importers are only required to cite the relevant GIP on their CBSA declaration forms. Regulatory amendments to GIP No. 80 — Carbon Steel and GIP No. 81 — Specialty Steel Products, to add a reporting and record-keeping requirement as a term and condition of the permits, came into effect in August 2019. Importers continue to be required to cite the relevant GIP on their CBSA import declaration forms at the time of release and, under the terms and conditions of the GIPs, may be required to submit import records to GAC upon request. Those regulatory amendments facilitated GAC’s ability to request records that an importer would already have to retain under the Customs Act. If, through import monitoring, a potential error is identified (e.g. with the value or quantity of an import), the importer is requested to provide additional documents and records to GAC to confirm that the import customs information provided is correct. If there is an error, the importer is requested to amend its information through a Canada Customs – Adjustment Request form.
Re-adding items 80 and 81 to the ICL pursuant to paragraph 5(1)(e) of the EIPA will likely result in some incremental cost savings for the government, as thereafter, it will no longer be necessary to re-add these items to the ICL every three years and to table an annual statistical summary in Parliament that contains information already available to the public on GAC’s website.
Further, if items 80 and 81 are not re-added to the ICL, the potential costs to Canadian businesses could be considerable, as steel import data available through Statistics Canada is delayed by six weeks. The objective of the Program is to identify potential instances of dumping on the Canadian market more quickly and allow remedial measures to be instituted as soon as possible (after due investigation and determination by the Canadian International Trade Tribunal). There are cost and profitability benefits for the steel industry of being able to quickly identify potential dumping situations and request early investigation. In addition, should items 80 and 81 not be re-added to the ICL, the United States could subject goods from Canada to Section 232 tariffs again, which could be very costly to Canada and its steel industry.
Small business lens
The Order will not result in any cost impacts for small businesses, as there is no fee charged to cite the relevant GIP for importations of steel. Compliance and reporting requirements continue to be in place under the above-mentioned ministerial GIPs.
The Order is a continuation of an existing regulation, which imposes limited administrative and no financial burden. Steel importers may simply cite the relevant GIP on CBSA import declaration forms at the time of release and, upon request, may be required to submit import records to Global Affairs Canada. As such, the one-for-one rule does not apply, as there is no incremental change in administrative burden on businesses.
The goal of the Order is not to restrict steel imports, but to ensure the monitoring capabilities of Global Affairs Canada and the industry, while improving the steel import data quality and collection process.
Regulatory cooperation and alignment
The Order is 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 Order will not result in positive or negative effects on the environment; therefore, a strategic environmental assessment is not required.
Gender-based analysis plus (GBA+)
The Program is designed to help Canadian steel producers make use of timely and quality data. As Canadian steel production is concentrated in Ontario, one could reasonably say that Ontario is disproportionally helped by the Order to re-add ICL items 80 and 81, which will enable the continued administration of the Program.
Otherwise, no other groups are disproportionately impacted.
Implementation, compliance and enforcement, and service standards
Global Affairs Canada is responsible for administering the import permits regime under the Export and Import Permits Act, including the issuance of import permits.
Global Affairs Canada will provide administrative guidance to importers by issuing a Notice to Importers that will be published on the departmental website.
Trade and Export Controls Bureau
Global Affairs Canada