On 10 January 2018, the World Trade Organization (WTO) circulated a request for consultations from Canada to the United States regarding laws, regulations, policies, practices and other measures with respect to US anti-dumping and countervailing duty proceedings. This is the first step in the WTO dispute settlement procedure. The request cites 188 trade remedy determinations, most which concern countries other than Canada, that are used to prove the existence of the challenged measures. Instead of challenging the application of US trade remedy measures in specific investigations concerning Canadian products, the challenge targets the US measures “as such”.  If successful, the challenge will benefit all exports to the US that have been subjected to the measures being challenged. An omnibus trade challenge of this magnitude by Canada is unprecedented.

The broadly defined challenge covers six categories of measures.

First, Canada is challenging the liquidation of final anti-dumping and countervailing duties in excess of WTO-consistent rates and the failure to refund cash deposits collected in excess of WTO-consistent rates.  Canada alleges that the United States purports to implement adverse WTO recommendations and rulings concerning US anti-dumping and countervailing measures but does so in a manner that is not compliant with its WTO obligations.

Second, Canada is challenging retroactive anti-dumping and countervailing duties following preliminary affirmative “critical circumstances” determinations.  This challenge relates to the US policy or practice of issuing preliminary affirmative critical circumstances determinations and instructions which direct US customs authorities to retroactively suspend liquidation of entries and collect provisional duties in the form of cash deposits or bonds for the 90-day period prior to the preliminary anti-dumping or countervailing duty determination.

Third, Canada is challenging the United States’ treatment of export controls as countervailable subsidies in countervailing duty proceedings.

Fourth, Canada is challenging how the United States calculates the amount of “benefit” associated with a subsidy that is conferred when a government provides goods at prices which are below a commercial benchmark. In conducting this calculation, the US methodology partially disregards comparisons where a government price is above the applicable commercial benchmark (i.e., where there is no subsidy). This is done by assigning a “zero” to these comparisons rather than a negative value when assessing the average subsidization for the transactions, thereby inflating the average.  This challenge appears to target the subsidy equivalent of “zeroing” in anti-dumping investigations, a practice which has already been declared to be WTO-inconsistent.

Fifth, Canada is challenging the United States’ effective closure of the evidentiary record before the preliminary determination.  According to Canada, the United States restricts interested parties from submitting factual information or other evidence which would allow them to fully defend their interests in anti-dumping and countervailing duty investigations by effectively closing the evidentiary record before the preliminary determination. Canada alleges that the United States purports to retain discretion to accept additional factual information after these deadlines have passed in “extraordinary circumstances” but does not exercise, or almost never exercises, this discretion.

Finally, Canada is challenging the “tie vote” provision for the United States International Trade Commission (ITC), the authority that makes injury determinations in trade remedy proceedings.  Where the Commissioners are evenly divided as to whether a determination of the ITC should be affirmative or negative, the ITC is deemed to have made an affirmative determination.

Canada’s challenges raise difficult and complex issues. Given the current caseload of the WTO dispute settlement system, if the challenge moves forward it will not be resolved for some time.  Canada and the United States now have 60 days to consult, after which Canada has the right to request the establishment of a dispute settlement panel and move the dispute to the next stage.

Tereposky & DeRose regularly provides advice on WTO dispute settlement. Should you have any questions regarding this topic, we are at your disposal.