Canada Gazette, Part I, Volume 152, Number 13: Regulations Amending the Special Import Measures Regulations and the Canadian International Trade Tribunal Regulations

March 31, 2018

Statutory authorities

Special Import Measures Act
Canadian International Trade Tribunal Act

Sponsoring department

Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Canada's trade remedy laws were last reviewed in 1996. Since then, significant changes have occurred in the global economy. In recent years, there have been heightened concerns regarding the ability of Canada's trade remedy system to address the circumvention of anti-dumping and countervailing (anti-subsidy) duties and to calculate appropriate anti-dumping duty rates in situations where there are price distortions in the domestic market of the country of export.

In Budget 2017, the Government of Canada announced measures to modernize and increase the inclusiveness of the trade remedy system. Regulatory amendments are required to support these measures.

Background

Under World Trade Organization (WTO) rules, when domestic producers are injured by imports that are dumped (i.e. exported at a price lower than prices in the home market or at a price that is below costs) or that have benefited from certain types of government subsidies, anti-dumping or countervailing duties may be imposed to remedy the injury.

In Canada, domestic producers may seek to have anti-dumping and countervailing duties imposed pursuant to the Special Import Measures Act (SIMA) following investigations by the Canada Border Services Agency (CBSA) and the Canadian International Trade Tribunal (CITT), which determine whether imports were dumped or subsidized, and whether such imports injured Canadian producers. These investigations are conducted in an independent, impartial and transparent manner.

In recent years, concerns have been raised by Canadian producers, most notably by the steel industry (which is also the most frequent user of the trade remedy system), that improvements were required to enhance the effectiveness of the trade remedy system. In particular, concerns were raised regarding the need to adopt additional mechanisms to ensure that dumped and unfairly subsidized imports do not enter the Canadian market without the appropriate payment of anti-dumping or countervailing duties, given the growing problem of duty circumvention in global trade. Since many of Canada's key trading partners (e.g. the United States, the European Union and Australia) have established mechanisms to address these challenges, concerns were raised that Canadian producers could be disadvantaged when competing for investments if Canada's trade remedy system was perceived to be weaker and did not offer similar recourse.

In response to these concerns, the Government launched public consultations in summer 2016 to seek stakeholder views regarding potential amendments to SIMA that would help ensure that Canada's trade remedy system continues to provide adequate remedies to domestic producers and operates in a transparent and accessible manner.

Following these consultations, in Budget 2017, the Government announced measures to provide Canadian producers with a more rigorous response to unfair trade, improve the transparency of Canada's trade remedy system and better align Canada's trade remedy system with those of the country's major trading partners. These measures are the following:

The implementation of these measures are in line with recommendations made in the report of the House of Commons Standing Committee on International Trade (the Committee), entitled "The Canadian Steel Industry's Ability to Compete Internationally," which was published on June 15, 2017. The report follows a study conducted by the Committee from October 2016 to March 2017, which included public hearings that heard from 23 witnesses, including representatives from Canadian steel producers, labour unions, trade associations, steel users and federal government officials.

The Government responded positively to the Committee report's six recommendations for improving Canada's trade remedy system. In particular, the Committee recommended that the Government reserve the right to use methods other than prices in the exporting country's market to establish the dumping margin when foreign companies cannot prove that they are operating under market economy conditions; that the Government grant labour unions an expanded role in Canada's trade remedy system; and that the Government work with its closest trading partners, particularly the United States, to ensure that those countries and Canada have adequate and effective trade remedy systems in place and that Canada does not become a dumping ground for foreign steel.

To implement the Budget 2017 measures, legislative amendments to SIMA were made through the Budget Implementation Act, 2017, No. 1 (BIA1 2017), which received royal assent on June 22, 2017. No objections were raised by stakeholders during the parliamentary process and the amendments received strong support from the Canadian Steel Producers Association.

To operationalize the legislative changes, amendments to the Special Import Measures Regulations (SIM Regulations) and the Canadian International Trade Tribunal Regulations (CITT Regulations) are required.

The SIM Regulations set out, among other things, the methodology used in anti-dumping and countervailing duty investigations, as well as the information that is required to be submitted in a properly documented complaint.

The CITT Regulations set out, among other things, the factors the CITT must consider when conducting safeguard inquiries and the rules for what constitutes a quorum of the CITT for different types of decisions.

Objectives

The objective of the proposed amendments is to enable the full implementation of measures announced in Budget 2017 and to enhance the effectiveness and inclusiveness of Canada's trade remedy system.

Description

Scope proceedings

The SIM Regulations would be amended to add new provisions that are required to operationalize scope proceedings, specifically to

As a consequence of the proposed amendments to the SIM Regulations, certain amendments are also being proposed to the CITT Regulations. In particular, the CITT would hear appeals of scope rulings made by the CBSA. Since this would likely result in an increased caseload for the CITT, the proposed amendments to the CITT Regulations would allow one member to constitute a quorum of the CITT for the purpose of hearing appeals made pursuant to SIMA.

This proposed amendment would provide the CITT with additional flexibility for managing its caseload, since it would no longer require the attention of three members to hear cases (i.e. the other two members could hear different cases), and could result in a more expedient resolution of cases as members are more available to hear additional cases. This proposed amendment would align with the CITT's existing practice concerning appeals made under the Customs Act.

Anti-circumvention investigations

The SIM Regulations would be amended to add new provisions that are required for the operationalization of anti-circumvention investigations, specifically to

Anti-dumping and countervailing duties are applied and collected pursuant to an order made by the CITT. When the CBSA makes a finding of circumvention, the CITT would be required to amend the order that originally established the duties, so that it would cover the goods that are the subject of the CBSA's anti-circumvention decision. This procedure would be entirely consequential, as the CITT would have no discretion to alter the scope of the extension of duties in a different manner than what is set out in the CBSA's determination.

Given the procedural nature of these types of orders, the CITT Regulations would be amended to allow one member to constitute a quorum of the CITT for the purpose of making an order to give effect to the CBSA's determination of circumvention, in contrast to the three members that usually constitute a quorum for trade remedy inquiries.

Addressing price distortions

When calculating margins of dumping, the CBSA normally compares the prices charged in the exporter's domestic market with the prices charged when it exports to Canada. WTO rules allow the investigating authority to disregard certain sales in the exporter's domestic market for various reasons, including the existence of a "particular market situation." A "particular market situation" may exist where there is government intervention in the market that distorts prices so that they are artificially low, such that they are not appropriate to use for the price comparison.

Changes were made to SIMA through the BIA1 2017 to allow the CBSA to disregard sales in the exporter's domestic market where a "particular market situation" exists for the purpose of determining the price of goods in the exporting market. These changes allow the CBSA to use an alternative methodology to determine prices charged in the exporting market by calculating the cost to produce the good, and adding reasonable amounts for selling, general and administration costs and profit.

As a consequence of these changes, it is necessary to change the meaning of a "reasonable amount of profit" for the purpose of SIMA, which is set out in certain provisions of the SIM Regulations. A consequential amendment would allow the CBSA to disregard sales in the exporter's market where a particular market situation exists in determining the reasonable amount of profit when constructing the price charged in the exporter's domestic market.

Union participation

The SIM Regulations would be amended to require that domestic producers include a list of relevant unions in dumping and subsidizing complaints and to add unions to the list of parties ("person interested") that may make representations to the CITT in public interest inquiries.

The CITT Regulations would also be amended to add unions to the definition of parties ("other interested party") that may make representations for the purpose of safeguard proceedings.

"One-for-One" Rule

The proposed amendments would prescribe the specific information that must be contained in written applications that would be made to the CBSA by Canadian businesses when requesting the initiation of a scope proceeding or the retroactive application of a scope ruling; when appealing decisions of the CBSA on whether goods are subject to duties; and when requesting the initiation of an anti-circumvention investigation. The level of administrative burden associated with the application process would be the same as what is required for other types of proceedings provided for under SIMA (e.g. filing a complaint for dumping investigations).

However, the proposed amendments provide Canadian businesses with the opportunity to voluntarily request remedial action. Any business that chooses to make use of these recourse mechanisms would also voluntarily choose to take on the associated incremental administrative burden of their own accord. Therefore, the "One-for-One" Rule does not apply to these amendments.

Small business lens

The small business lens does not apply to these amendments, as there would be no costs imposed on small business.

Consultation

In 2016, Finance Canada launched public consultations to seek stakeholders' views on whether changes to SIMA would help ensure that the trade remedy system continues to provide adequate remedies to domestic producers and to operate in a transparent and accessible manner. A detailed consultation paper was published in the Canada Gazette, Part I, on April 30, 2016, that specifically solicited comments on proposed measures being considered by the Government of Canada on the establishment of scope proceedings and anti-circumvention investigations, as well as how to address price distortions.

A total of 46 submissions were received from a broad range of stakeholders, including Canadian businesses and business associations, foreign business associations, municipal governments, trade unions, law firms and members of Parliament.

Canadian steel producers and other users of the trade remedy system, who accounted for the majority of submissions received, were supportive of these measures, which served to address the continued impact of dumped and subsidized goods in the Canadian market. In contrast, submissions from counsel representing importer and exporter interests generally opposed measures that could allow the CBSA to extend the scope of anti-dumping and countervailing duties. Although the consultation paper did not specifically propose to include unions in the list of eligible participants in CITT proceedings, unions also made submissions requesting that they be granted the right to participate in trade remedy proceedings.

The measures announced by the Government in Budget 2017 were informed by this consultation process and include proposed measures that received broad support from stakeholders. During the development of these regulatory amendments, the views of stakeholders on the broader policy approach for improving Canada's trade remedy system were also taken into account.

Rationale

These amendments are needed to support the full implementation of the legislative changes made to SIMA through the BIA1 2017. The legislative changes, and supporting regulatory amendments, would serve to improve the effectiveness of Canada's trade remedy system by ensuring that anti-dumping and countervailing duties are not circumvented and that margins of dumping account for market distortions in the country of export.

The establishment of two new enforcement proceedings (i.e. scope and anti-circumvention) would also allow the CBSA to better enforce trade remedy measures. In particular, the scope proceedings would allow interested parties to inform decisions made by the CBSA concerning whether certain goods are subject to anti-dumping or countervailing duties. The anti-circumvention investigations would allow domestic producers to request that the CBSA investigate whether certain goods are being imported for the specific purpose of circumventing existing duties and undermining the remedial effect of duties. If warranted, the scope of existing duties may be extended to address circumvention.

In addition, provisions concerning price distortions in the country of export would allow the CBSA to better account for the effects of particular market situations when it calculates margins of dumping.

These measures would provide Canadian producers with access to similar mechanisms as those available to the producers of trading partners who are also major users of trade remedies (e.g. Australia, the European Union and the United States). This would ensure that Canada's trade remedy system is able to offer comparable levels of protection for domestic producers from the injurious effects of unfair trade. In this regard, alignment of measures with Canada's trading partners would allow Canadian producers to be more competitive in attracting investments.

Other stakeholders implicated in Canada's trade remedy system would also be expected to benefit through increased transparency and inclusiveness. Unions would be able to participate in trade remedy proceedings, which would allow workers' interests to be fully reflected. Further, importers could also benefit from the predictability afforded by the binding rulings made by the CBSA through a scope proceeding. These amendments would not result in any reduction of parties' existing rights.

The net resource implications for the CBSA as a result of the coming into force of the legislation and the supporting regulatory amendments would depend on the caseload generated by the new scope proceedings and anti-circumvention investigations, and the extent to which these proceedings would result in a decrease in the number of dumping or subsidizing complaints, given that domestic industries may be able to use circumvention proceedings instead of filing a new complaint to address circumvention.

Moreover, these proceedings were designed in a manner that would provide the CBSA with additional flexibility to manage its resources by allowing the CBSA to extend the timelines for conducting these proceedings when a particular case is complex or when there is a large variety of goods or number of interested parties involved in the proceeding.

Implementation, enforcement and service standards

The CBSA and the CITT would administer and interpret these amendments in the course of their administration of SIMA. The amendments made to SIMA through the BIA1 2017 and these regulatory amendments would come into force on the day after the day on which the Order in Council bringing the SIMA amendments into force is made.

Guidance on the process and the requirements that must be fulfilled by interested parties requesting the initiation of a scope proceeding or an anti-circumvention investigation would be published on the CBSA website following the coming into force of these amendments.

Contact

Alan Ho
International Trade Policy Division
Department of Finance
Ottawa, Ontario
K1A 0G5
Telephone:
613-369-4022
Email:
alan.ho@canada.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, on the recommendation of the Minister of Finance, proposes to make the annexed Regulations Amending the Special Import Measures Regulations and the Canadian International Trade Tribunal Regulations pursuant to

(a) subsection 97(1)footnote a of the Special Import Measures Actfootnote b; and

(b) section 40footnote c of the Canadian International Trade Tribunal Actfootnote d.

Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Alan Ho, International Trade Policy Division, Department of Finance, Ottawa, Ontario K1A 0G5 (email: alan.ho@canada.ca).

Ottawa, March 22, 2018

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Amending the Special Import Measures Regulations and the Canadian International Trade Tribunal Regulations

Special Import Measures Act

Special Import Measures Regulations

1 Paragraph 13(a) of the Special Import Measures Regulations footnote 1 is replaced by the following:

2 Section 37 of the Regulations is amended by adding the following after paragraph (b):

3 Subsection 37.2(1) of the Regulations is amended by adding the following after paragraph (b):

4 The heading before section 38 and sections 38 to 40 of the Regulations are replaced by the following:

Joinder of Investigations and Proceedings

38 Subject to section 39, if the same goods, like goods or similar goods are

39 (1) An investigation referred to in paragraph 38(c) is not to be joined with another investigation under that paragraph if a preliminary determination of dumping or subsidizing has been made in respect of at least one of those investigations.

(2) An investigation referred to in paragraph 38(g) or (i) is not to be joined with another investigation or proceeding under that paragraph if a statement of essential facts has been published in respect of at least one of those investigations.

40 (1) If complaints are joined under paragraph 38(a), the President shall cause written notice of the joinder to be provided to the complainants and government of each country of export involved in the complaints.

(2) If preliminary inquiries are joined under paragraph 38(b), the Tribunal shall cause written notice of the joinder to be provided to the President and the complainants, importers, exporters and government of each country of export involved in the inquiries.

(3) If investigations are joined under paragraph 38(c), the President shall cause written notice of the joinder to be provided to the Tribunal and the complainants, importers, exporters and government of each country of export involved in the investigations.

(4) If applications or complaints are joined under paragraph 38(d), (f) or (h), the President shall cause written notice of the joinder to be provided to the complainants and applicants involved in them.

(5) If proceedings or investigations are joined under paragraph 38(e), (g) or (i), the President shall cause written notice of the joinder to be provided to the complainants, applicants, importers, exporters, government of each country of export and domestic producers involved in them.

5 (1) Subsection 40.1(1) of the Regulations is replaced by the following:

40.1 (1) A request referred to in subsection 45(1) of the Act shall be made in writing to the Tribunal within 45 days after the issuance of an order or finding by the Tribunal under section 43 of the Act.

(2) Subsection 40.1(4) of the Regulations is replaced by the following:

(4) A request by a person referred to in subsection 45(6) of the Act to make representations to the Tribunal on the question referred to in that subsection shall be made in writing and filed with the Tribunal within 21 days after the date of publication of the notice referred to in subsection 45(2) of the Act.

6 Section 41 of the Regulations is replaced by the following:

41 For the purpose of subsection 45(6) of the Act, person interested means

7 Section 47 of the Regulations is replaced by the following:

47 For the purposes of subsections 56(1.01) and (1.1), 58(1.1) and (2) and 70(1) to (3) of the Act, a request for a re-determination shall be delivered to the Canada Border Services Agency at the address specified on its website.

8 Section 51 of the Regulations is repealed.

9 The Regulations are amended by adding the following after section 52:

52.1 For the purposes of subsections 70(1) to (3) of the Act, a request for a re-determination shall be accompanied by

52.2 For the purpose of subsection 60.1(2) of the Act, the notice of a re-determination is to be published on the website of the Canada Border Services Agency no later than 15 days after the day on which the re-determination was made.

52.3 (1) For the purpose of subsection 61(1.1) of the Act, interested person means any person who, in the opinion of the Tribunal, has a substantial interest in the matter and any person who

(2) For the purpose of subsection 63(1) of the Act, interested person means

(3) For the purpose of subsection 67(4) of the Act, interested person means any person who provided information to the President for the purpose of the review of the scope ruling.

10 The portion of section 53 of the Regulations before paragraph (a) is replaced by the following:

53 For the purposes of the definition government of a NAFTA country in subsection 2(1) of the Act, the following are prescribed departments for the purposes of subsections 56(1.01), 58(1.1), 59(3.1) and 70(1) to (3) of the Act:

11 The Regulations are amended by adding the following before section 54:

Official Publication

12 The Regulations are amended by adding the following after section 54:

Scope Ruling

54.1 An application for a scope ruling referred to in subsection 63(1) of the Act is complete if it contains the following information:

54.2 For the purpose of subsection 63(4) of the Act, the President shall reject an application for a scope ruling if the application is incomplete or there is a scope ruling that applies to the goods for which the ruling is applied for.

54.3 For the purpose of subsection 63(5) of the Act, the President may reject an application for a scope ruling if any of the following circumstances apply:

54.4 For the purpose of subsection 66(2) of the Act, the President may extend the period for making a scope ruling to 210 days if any of the following circumstances apply:

54.5 For the purpose of subsection 66(3) of the Act, the President may terminate a scope proceeding if any of the following circumstances apply:

54.6 For the purpose of subsection 66(6) of the Act, the President may take the following factors into account in making a scope ruling:

54.7 For the purpose of subsection 67(2) of the Act, the President may review a scope ruling in any of the following circumstances:

Expedited Review

13 (1) The portion of subsection 55(1) of the Regulations before paragraph (a) is replaced by the following:

55 (1) For the purpose of subsection 13.2(2) of the Act, a request for a review shall contain the following information:

(2) Subsection 55(2) of the Regulations is replaced by the following:

(2) A request for a review shall be delivered to the Canada Border Services Agency at the address specified on its website.

14 The Regulations are amended by adding the following after section 57.1:

Anti-circumvention Investigations

57.11 For the purpose of paragraph 71(a) of the Act, the following factors may be considered in determining whether there has been a change in the pattern of trade:

57.12 For the purpose of paragraph 71(b) of the Act, the following activities are prescribed:

57.13 The following factors may be considered in determining whether the processes of assembly or completion of the like goods referred to in paragraph 57.12(a) or (b) are insignificant:

57.14 The following factors may be considered in determining whether a modification of like goods referred to in paragraph 57.12(c) is slight:

57.15 For the purposes of paragraph 71(b) of the Act, the following factors may be considered in determining whether imports of goods to which an activity referred to in section 57.12 applies are undermining the remedial effects of the applicable order of the Governor in Council or the applicable order or finding of the Tribunal:

57.16 For the purpose of paragraph 71(c) of the Act, the following factors may be considered in determining the principal cause of a change in trade pattern:

57.17 For the purpose of subsection 72(3) of the Act, a complaint in respect of the alleged circumvention of an order of the Governor in Council or an order or finding of the Tribunal shall contain the following information:

57.18 For the purposes of paragraphs 73(1)(b), 75(3)(c), 75.1(1)(b) and 75.4(7)(c) of the Act, the reasons are to be published on the website of the Canada Border Services Agency.

57.19 (1) For the purpose of subsection 74(1) of the Act, the statement of essential facts is to be published on the website of the Canada Border Services Agency.

(2) For the purpose of subsection 74(2) of the Act, seven days after the day on which that statement is published constitutes sufficient time.

57.2 For the purpose of subsection 75.2(1) of the Act, the period for making a decision may be extended to 240 days in any of the following circumstances:

57.21 (1) For the purpose of subsection 75.6(2) of the Act, a request for an exemption from the extension of duties made by an exporter to Canada shall contain the following information:

(2) A request for an exemption shall be delivered to the Canada Border Services Agency at the address specified on its website.

Canadian International Trade Tribunal Act

Canadian International Trade Tribunal Regulations

15 (1) The portion of the definition other interested party before paragraph (a) in section 3 of the Canadian International Trade Tribunal Regulations footnote 2 is replaced by the following:

other interested party, for the purposes of subsections 19.02(2), 25(2), 26(2), (3) and (4), 28(1) and (3), 29(2) and (4), 30(4), 30.01(5) and (8), 30.011(6) and (9), 30.012(7) and (10), 30.06(3), 30.07(2) and (3), 30.09(2), 30.3(2) and 30.31(4) and paragraph 30.32(a) of the Act, means

(2) The definition other interested party in section 3 of the Regulations is amended by adding the following after paragraph (a):

(3) Paragraph (d) of the definition other interested party in section 3 of the Regulations is replaced by the following:

16 (1) Paragraph 3.2(b) of the Regulations is replaced by the following:

(2) Subsection 3.2 of the Regulations is amended by adding "or" after paragraph (c) and adding the following after paragraph (c):

Coming into Force

17 These Regulations come into force on the day on which section 89 of Budget Implementation Act, 2017, No. 1, chapter 20 of the Statutes of Canada, 2017, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.