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Compendium of Antidumping and Countervailing Duty Laws in the Western Hemisphere
I. Legal Authority to Impose Antidumping and Countervailing Duties
Article VI of the GATT 1995, the WTO Antidumping Agreement ("AD Agreement") and the Agreement on Subsidies and Countervailing Measures ("SCM Agreement").
These Agreements apply to all WTO signatories.
The primary legal instrument for Canada's international commitments regarding antidumping, subsidies and countervailing duties in the Special Import Measures Act and regulations made pursuant thereto.
This legislation has been amended in accordance with Canada's WTO rights and obligations.
The Special Import Measures Act regulations elaborate on the provisions in the Act.
These regulations are currently being amended.
The draft regulations entered into force on January 1, 1995, and the final regulations are expected to be promulgated in mid-1996.
Revenue Canada provides a handbook respecting administrative procedures.
This handbook is currently being updated and is expected to be available by mid-1996.
II. Authorities Responsible for Conducting Investigations
The Canadian antidumping/subsidies countervail system is bifurcated.
The Special Import Measures Act (SIMA) subsection 31.(1) specifies that the Deputy Minister of National Revenue (DM) is responsible for deciding whether to initiate an investigation and whether to make a preliminary determination of dumping or subsidizing and reasonable indication of injury, retardation or threat of injury caused by such dumping or subsidizing pursuant to subsection 38.(1).
Once such a preliminary determination is made, the DM files a written notice with the Secretary of the Canadian International Trade Tribunal ("Tribunal").
Upon receipt of such notice, the Tribunal commences an injury inquiry and is responsible for making the final decision on the matter of injury, threat of injury and retardation.
The Tribunal is an independent quasi-judicial body that carries out its statutory responsibilities in an autonomous and impartial manner and reports to Parliament through the Minister of Finance.
The main legislation governing the trade-remedies- related work of the Tribunal is the Canadian International Trade Tribunal Act and its regulations, the Canadian International Trade Tribunal Rules (Canadian International Trade Tribunal's Rules of Procedure), the SIMA Act, and its regulations.
B. Antidumping and Countervailing Duties
The Deputy Minister of National Revenue (DM) is responsible for deciding whether to initiate an investigation and whether to make a preliminary determination of dumping or subsidizing and reasonable indication of injury, retardation or threat of injury caused by such dumping or subsidizing.
The Special Import Measures Act subsection 41(1) requires that the DM conduct the final dumping/subsidizing investigation.
A. Like Product
"Like goods," in relation to any other goods, means
(a) goods that are identical in all respects to the other goods, or
(b) in the absence of any goods described in paragraph (a), goods the uses and other characteristics of which closely resemble those of the other goods.
2.(1) of the Special Imports Measures Act.
B. Domestic Producers
"Domestic industry" means, other than for the purposes of determining injury and subject to the provision governing regional markets, the domestic producers as a whole of the like goods or those domestic producers whose collective production of the like goods constitutes a major proportion of the total domestic production of the like goods except that, where a domestic producer is related to an exporter or importer of dumped or subsidized goods, or is an importer of such goods, "domestic industry" may be interpreted as meaning the rest of those domestic producers.
SIMA, Sec. 2.(1)
(i) For standing purposes, domestic industry means the domestic producers as a whole of the like product, except that where a domestic producer is related to an exporter or importer of dumped or subsidized goods, or is an importer of such goods, "domestic industry" may be interpreted as meaning the rest of those domestic producers. 31.(3)
(ii) In exceptional circumstances, the territory of Canada may, for the production of any goods, be divided into two or more regional markets and the domestic producers of like goods in any of those markets may be considered to be a separate domestic industry where
(a) the producers in the market sell all or almost all of their production of like goods in the market; and
(b) the demand in the market is not to any substantial degree supplied by producers of like goods located elsewhere in Canada. 2.(1.1).
No investigation may be initiated as the result of a complaint unless the complaint is supported by domestic producers whose production represents more than fifty percent of the total production of like goods by those domestic producers who express either support for or opposition to the complaint, and the production of the domestic producers who support the complaint represents twenty-five percent or more of the total production of like goods by the domestic industry. 31.(2).
Revenue Canada must be satisfied that the required industry support thresholds are met before a case can be initiated.
If the required industry support thresholds are not met, either the complainant or Revenue Canada officials will contact all known producers so as to canvass them for their views on the proposed complaint.
Where there is a large number of producers, a statistically valid sample of producers could be polled.
E. Normal Value
Generally, normal value is the price of like goods -- in the same or substantially the same quantities as the sale of goods to the importer and in the ordinary course of trade -- sold by the exporter in the home market to purchasers with whom the exporter has no association at the time of sale and who are at the same or substantially the same level of trade as the importer (SIMA, Sec. 15).
Differences in terms and conditions of sale, in taxation and other differences relating to price comparability between the goods sold to the Canadian importer and the domestic sales by the exporter are taken into consideration in determining normal value.
Allowances may be made for differences in quantities, trade level, quality, structure, design, material and other such differences.
Allowances may also be made for deferred and cash discounts.
The SIMA regulations provide for such adjustments to establish the normal value.
However, where the normal value cannot be determined in this manner, SIMA section 19(a) specifies that the authorities may construct the normal value by using the price of goods exported to third countries adjusted in the prescribed manner and circumstances to reflect the differences in terms and conditions of sale, in taxation and other differences relating to price comparability between the goods sold to the importer in Canada and the like goods sold by the exporter to importers in the third country.
Alternatively, SIMA section 19(b) directs the authorities to construct the normal value as the aggregate of the cost of production of the goods, plus a reasonable amount for administrative, selling and all other costs and a reasonable amount for profits.
F. Calculation of Cost of Production
Paragraph 97(1)(e) of the Special Import Measures Act (SIMA) provides authority for defining by regulation, cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits, for the purpose of constructed costs.
In addition, paragraph 97(1)(e.1) provides authority to prescribe by regulation the manner of calculating cost of production and administrative, selling and all other costs with respect to goods.
In this regard, the regulations provide as follows: cost of production means the aggregate of all costs that are:
(i) attributable to, or in any manner related to, the production of goods, or
(ii) directly attributable to the design or engineering of the goods; a reasonable amount for profits means (in hierarchy): (i) the weighted average profit made on sales by the exporter of like goods for use in the country of export; (ii) the weighted average profit made on sales by the exporter for use in the country of export of goods of the same general category as goods sold to the importer in Canada; (iii) the weighted average profit for sales of like goods made by other producers for use in the country of export; (iv) the weighted average profit for sales made by other producers of goods of the same general category as the goods sold to the importer in Canada for use in the country of export; (v) the weighted average profit for sales by the exporter of goods that are of the group or range of goods that is next largest to the goods referred to in (iv) above for use in the country of export; (vi) the weighted average profit for sales made by other producers of goods that are of the group or range of goods that is next largest to the category referred to in (iv) above for use in the country of export; a reasonable amount for administrative, selling, and all other costs means (in hierarchy) (i) an amount equal to the average of all administrative, selling, and other costs, including any costs for design and engineering not included in cost of production but reasonably attributable to the production and domestic sales of like goods, made by the exporter, that satisfy the greatest number of conditions for the determination of normal value as set out in paragraphs 15 (a) to (e) of the SIMA, taking into account subsection 16(1) of the Act which sets out the rules that are applicable if conditions identified in section 15 cannot be met, or (ii) an amount equal to all administrative, selling, and other costs, including the costs of any warranty against defect or guarantee of performance and any design and engineering costs that are not included in the cost of production but are reasonably attributable to the goods. Paragraph 16(2)(b) of the SIMA specifies that any sale of like goods by the exporter during a period of not less than six months shall be excluded from the normal value calculation where three separate conditions are met: i) the sale price is less than the per unit cost of the goods; ii) the volume of sales below per unit costs noted in (I) is 20 percent or greater of the volume of sales of like goods during the period of not less than 6 months or the average selling price of like goods is less than the average cost of the goods; and iii) the unit sale price is equal to or less than the average cost of all like goods sold during the period.
G. Export Price
Section 24 of the SIMA specifies that the export price of goods is an amount equal to the lesser of the exporter's sale price for the goods and the price at which the importer has purchased or agreed to purchase the goods.
In making this comparison, both prices are adjusted by:
i) the costs, charges and expenses incurred in preparing the goods for shipment to Canada that are additional to those costs, charges and expenses generally incurred on sales of like goods for use in the country of export,
ii) any duty or tax imposed on the goods by or pursuant to a law of Canada or of a province to the extent that the duty or tax is paid by or on behalf or at the request of the exporter, and
iii) all other costs, charges and expenses, resulting from the exportation of the goods or arising from their shipment.
In cases where there is no export price or where it appears to the authorities concerned that the export price is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, SIMA subsection 25(1)(c) specifies that the export price of the goods, when the goods are sold to an independent buyer, is the price of the goods less:
(i) all costs incurred by the importer in connection with the importation and sale;
(ii) an amount for profit by the importer;
(iii) costs incurred in preparing the goods for export (costs other than those generally incurred on sales in the country of export); and
(iv) all other costs resulting from the exportation of the goods.
When the goods are imported for the purpose of assembly, packaging or other further manufacture in Canada or for incorporation into other goods in the course of manufacture or production in Canada, SIMA subsection 25(1)(d) specifies that the price of the goods, when sold to an independent person, is the price of the goods as assembled less an amount equal to the aggregate of:
(i) an amount for profit on the sale of the assembled, packaged or otherwise further manufactured goods or of the goods into which the imported goods have been incorporated;
(ii) the administrative, selling and all other costs incurred in selling the goods;
(iii) the costs that are related to the assembly, packaging or other further manufacture of the goods or to the manufacture or production of the goods into which the imported goods have been incorporated;
(iv) the costs, charges and expenses incurred in preparing the imported goods for shipment to Canada that are additional to those costs, charges and expenses generally incurred on sales of like goods for use in the country of export; and
(v) all other costs, charges and expenses, including duties imposed by virtue of this Act or the Customs Tariff and taxes resulting from the exportation of the imported goods, or incurred on or after the importation of the imported goods and on or before the sale.
For any cases not provided for in SIMA subsection 25(1)(c) or (d), SIMA subsection 25(1)(e) stipulates that the price is determined in such manner as the Minister of National Revenue specifies.
H. Export Price - Adjustments
Canadian implementation of the WTO provisions for adjustments arising from delivery costs, taxes and duties and differences in quantities, quality and level of trade are applied to the SIMA sections 15 (subject to subsection 16(1)), 19 and 20 (normal value calculations) and can be found in Sections 3-10 of the SIMA regulations.
Quantitative Adjustment: Sections 3 and 4 of the SIMA regulations provide that the price of the like goods shall be adjusted to reflect the quantity discount generally granted on comparable sales.
Qualitative Adjustment: Section 5 of the SIMA regulations provides that price adjustments shall be made for differences in:
(a) quality, design, structure, or material;
(b) warranties or guarantees;
(c) time permitted between date of order and date of shipment; and
(d) other conditions of sale.
Discounts: Section 6 of the SIMA regulations specifies that the price of the like good in Canada shall be adjusted for any rebate, deferred discount, or cash discount for which it would be eligible were the sale to occur in the country of export.
Delivery Costs: Sections 7 and 8 of the SIMA regulations require that like goods sold on a delivered basis shall be adjusted for their cost of delivery.
Level of Trade: Section 9 of the SIMA regulations specifies that cost, charge, or expense adjustments shall be made when purchasers of like goods, who are at the trade level nearest and subsequent to that of the importer in Canada, have been substituted for purchasers who are at the same trade level as the importer.
Taxes and Duties: Section 10 of the SIMA regulations requires that the price of the like goods shall be adjusted by deducting any taxes or duties not borne by goods sold to the importer in Canada.
Currency Conversion: For the purposes of calculating the margin of dumping, Section 25.1 of the SIMA regulations requires that where a sale of goods to an importer in Canada takes place during a period in which there is a sustained movement in the rate of exchange that results in an appreciation in the value of the foreign currency in terms of the Canadian dollar and the exporter's selling price of those goods is adjusted from the price prevailing 60 days before the date of sale to reflect the sustained movement in the exchange rate, the export price of the goods shall be adjusted by multiplying that price by the result obtained by dividing the prevailing rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations, in respect of the foreign currency for the date of sale, by the average of the rate of exchange referred to in section 5 of those Regulations, in respect of that foreign currency, prevailing for each of the 30 days preceding the sixtieth day before the date of sale.
Sections 44 and 45 of the SIMA regulations provide further guidance for currency conversion as it relates to the determination of dumping margins.
Section 44.1 specifies that, subject to subsection (2) and section 45, where an amount that is used or taken into account for any purpose in the administration or enforcement of the Act is expressed in the currency of a country other than Canada, the equivalent dollar value of that amount shall be calculated by multiplying that other currency amount by the prevailing rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations in respect of that currency for the date of sale.
Section 44.2 requires that where a sale of a foreign currency on forward markets is directly linked to the export sale to an importer in Canada, the rate of exchange that was used in the forward sale of currency shall be used in place of the rate of exchange referred to in subsection (1).
Section 45 requires that where sufficient information has not been furnished or is not available at the time the goods have been released from customs possession or entered for warehouse, whichever is the earlier, to enable the calculation under section 44 to be made on the basis of the date of sale, the date of shipment to Canada shall be used in place of the date of sale for the purpose of that section.
Subsection 2 of the SIMA defines injury as material injury to a domestic industry.
Subsection 2 also defines retardation as material retardation to the establishment of a domestic industry.
Subsection 37.1(1) of the SIMA regulations specifies factors for consideration in injury or retardation determinations, including:
(1) the total volume of the dumped or subsidized goods;
(2) whether there has been a significant increase in the volume of such imports of such goods;
(3) whether the dumped/subsidized goods undercut the price of like goods;
(4) the effect of the dumped/subsidized goods on domestic prices of like goods;
(5) the impact of the dumped/subsidized goods on the domestic industry engaged in the production of like goods (e.g., output, sales, market share, profits, etc.); and
(6) any other factors that are relevant in the circumstances.
Moreover, subsection 37.1(1) of the SIMA regulations prescribes additional factors that must be considered for the purposes of determining whether the dumping/subsidizing has caused injury, retardation or threat of injury.
(a) whether a causal relationship exists between the dumping or subsidizing of any goods and the injury, retardation, or threat of injury, on the basis of:
(i) the volumes and prices of imports of like goods that are not dumped or subsidized;
(ii) a contraction in demand for the goods or like goods;
(iii) changes in patterns of consumption of the goods or like goods;
(iv) trade-restrictive practices of, and competition between, foreign and domestic producers;
(v) developments in technology;
(vi) the export performance and productivity of the domestic industry in respect of like goods; and
(vii) any other factors that are relevant in the circumstances; and
(b) whether any factors other than the dumping or subsidizing of the goods has caused injury or retardation or is threatening to cause injury.
J. Threat of Injury
According to Section 2 of the SIMA, the dumping or subsidizing of goods shall not be found to be threatening to cause injury or to cause a threat of injury unless the circumstances in which the dumping or subsidizing of goods would cause injury are clearly foreseen and imminent.
Section 37.1(2) of the SIMA regulations sets out factors to be considered in a threat of injury determination, including:
(1) the nature of the subsidy in question (if applicable) and its likely effects on trade;
(2) whether there has been a significant increase of dumped or subsidized goods, for which the rate of increase indicates a likelihood of substantially increased imports;
(3) whether there is sufficient freely disposable capacity or an imminent substantial increase in the capacity of an exporter;
(4) the potential for product shifting where production facilities that can be used to produce the goods are currently being used to produce other goods;
(5) whether the goods are entering the domestic market at prices that are likely to have a significant depressing or suppressing effect on the price of like goods and are likely to increase demand for further imports of the goods;
(6) inventories of the goods;
(7) the actual and potential negative effects on existing development and production efforts, including efforts to produce a derivative or more advanced version of like goods; and
(8) any other relevant factors.
Additional factors relevant to the determination of threat of injury are prescribed in subsection 37.1(3) of the SIMA regulations. (See listing of factors under the "Injury" section).
K. Material Retardation
Retardation means material retardation of the establishment of a domestic industry.
See also the "Injury" section above as it pertains to Canada.
Subsection 42(3) of the SIMA allows the Canadian International Trade Tribunal (Tribunal) to assess the cumulative injurious effect of the dumping or subsidizing of goods that are imported into Canada from more than one country if:
(a) the margin of dumping or the amount of the subsidy from each of those countries is not insignificant and the volume of the goods from each of those countries is not negligible; and
(b) an assessment of the cumulative effect is appropriate taking into account the conditions of competition.
With respect to Subsidies/Countervail, the Tribunal, according to subsection 42(4), shall, also take into account the developing countries provisions of the Subsidies Agreement in making a cumulative assessment.
M. De Minimis Provision
(a) De Minimis Dumping Margin
For purposes of calculating dumping margins, section 2 of the SIMA defines insignificant as a margin of dumping that is less than two percent of the export price of the goods.
(b) Negligible Imports
The SIMA subsection 2.(1) specifies that negligible means, in respect of the volume of dumped goods of a country, (a) less than three percent of the total volume of goods that are released into Canada from all countries and that are of the same description as the dumped goods, except where the total volume of dumped goods of three or more countries, each of whose exports of dumped goods into Canada is less than three percent of the total volume of goods referred to in paragraph (a), is more than seven percent of the total volume of goods referred to in paragraph (a), the volume of dumped goods of any of those countries is not negligible.
With respect to subsidized goods from developing countries, subsection 42(4) requires the Tribunal to take into account the provisions of paragraph 12 of Article 27 of the Subsidies Agreement.
For purposes of calculating an amount of subsidy, section 2 of the SIMA defines insignificant as an amount of subsidy that is less than one percent of the export price of the goods.
With respect to subsidized goods from developing countries, subsection 42(4) requires the Canadian International Trade Tribunal to take into account the provisions of paragraph 12 of Article 27 of the Subsidies Agreement.
See also the discussion of negligible imports for injury purposes under "De Minimis Provisions -- Antidumping" section, above.
N. Margin of Dumping
The margin of dumping, if any, for goods from a particular exporter is the amount determined by subtracting the weighted average export price of the goods from the weighted average normal value of the goods.
The margin of dumping in relation to goods from a particular country is the weighted average of the margins of dumping for all exporters from that country.
As specific normal values are usually provided to the exporter, exporters can adjust their export prices upward (i.e., to the normal value) in order to avoid any assessment of antidumping duties against the goods.
O. Subsidy Rate
Section 30.4 of the SIMA provides the statutory authority for the regulations prescribing the determination of the amount of subsidy.
In accordance with the definition provided in the WTO Agreement on Subsidies and Countervailing Measures (under Article 1and the guidelines under Article 14) of "subsidy", the amount of subsidy is calculated on the basis of the benefit to the recipient.
Consistent with the "benefit to the recipient" principle, the SIMA regulations (section 26, Part II) requires that the following be deducted when calculating the amount of subsidy:
(a) the amount of any fees or other expenses necessarily incurred by the recipient of the subsidy to obtain the subsidy,
(b) the amount of any tax/duty/other charges levied by a government against the recipient to offset the subsidy, and
(c) the amount of any loss in the value of the subsidy resulting from deferred receipt of the subsidy.
Whether any of the above deductions are warranted depends on the unique circumstances of each case and, in particular, whether there is a sufficient basis for relating any fees, taxes, duties or other charges paid by the recipient and the subsidy received.
In addition, the amount of the benefit should normally not exceed, on a per unit basis, the amount of the financial contribution by the government.
The detailed methodologies for the calculation of amounts of subsidy for various forms of subsidies, (e.g., grants, preferential loans, loan guarantees, etc.) are prescribed in Part II of the SIMA regulations. While it is expected that the regulations will cover most cases, where no manner of determining an amount of subsidy has been prescribed, the amount of subsidy can be determined by Ministerial specification pursuant to subsection 30.4(2) of the SIMA.
Section 30 also specifies that an amount of subsidy does not include any amount attributable to a non-actionable subsidy.
Part I.2 of the SIMA regulations specifies subsidies which are to be treated as non-actionable (i.e., industrial research and pre-competitive development assistance, assistance to disadvantaged regions and assistance for the adaptation of existing facilities to new environmental standards.
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