19 Jul 2019

15-Day Comment Period for Proposed Changes to Canada’s Trade Remedies Regulations Concerning Distorted Input Costs & “Particular Market Situations”

The 20 July 2019 edition of the Canada Gazette Part I (Vol. 153, No. 29) includes proposed Regulations Amending the Special Import Measures Regulations. The proposed amendments follow from recommendations of a working group comprising the Government of Canada, the Canadian steel industry, and the steel industry’s workers. The objective of the working group’s consultations was to determine what additional protections were needed in Canada’s existing trade remedies regime “to enhance the effectiveness of the trade remedy system in protecting Canadian producers and workers against the impacts of unfairly traded imports, while maintaining a fair and balanced approach to trade remedies and respecting Canada’s legal and trade obligations”.

The proposed amendments are intended to provide the CBSA with flexibility in how it calculates the costs of production in anti-dumping and countervailing duty investigations, specifically in order to: (i) address situations where inputs were acquired from associated parties at prices below cost or below a representative benchmark; and (ii) provide further scope to address cost distortions created by a particular market situation.

Where inputs are supplied by an associated supplier (e.g., a subsidiary or affiliated company), the CBSA will be empowered to use, for the purpose of calculating the cost of production of the products in question, the highest of (i) the transfer price between parties, (ii) the actual costs to the supplier, or (iii) a reasonable benchmark determined in the country of export if such information is available.

Additionally, where the CBSA has determined that a particular market situation is affecting the price of the products sold in the domestic market of the exporting country, such that the CBSA has recourse to alternative methodologies to determine the margin of dumping (i.e., constructed costs), the proposed amendments would provide the CBSA with “alternative options” to use in determining the costs of inputs to the extent that “they do not allow for a proper comparison between the sale of goods in the country of export and the sale of goods exported to Canada”. The amended regulations will set out a “hierarchy of alternatives” to be applied in order to determine the costs of the inputs, depending on the information that is available on the record and whether the alternative being applied would allow for a proper comparison between the domestic sales price and the export price.

The proposed amendments introduce a new provision into the regulations that provides as follows: if the CBSA determines that “a particular market situation exists which does not permit a proper comparison of the sale of like goods with the sale of the goods to the importer in Canada, such that the acquisition cost of an input used in the production of the goods does not reasonably reflect the actual cost of that input, the cost of that input in the country of export shall be considered to be the first of the following amounts that reasonably reflect the actual cost of the input so as to permit a proper comparison of the sale of like goods with the sale of the goods to the importer in Canada:

  • (a) the price of the same or substantially the same inputs that are produced in the country of export and sold to the exporter or to other producers in the country of export;
  • (b) the price of the same or substantially the same inputs that are produced in the country of export and sold from the country of export to a third country;
  • (c) the price of the same or substantially the same inputs determined on the basis of the published prices of those inputs in the country of export;
  • (d) the price of the same or substantially the same inputs that are produced in a third country and sold to the exporter or to other producers in the country of export, adjusted to reflect the differences relating to price comparability between the third country and the country of export; or
  • (e) the price of the same or substantially the same inputs determined on the basis of the published prices of those inputs outside the country of export, adjusted to reflect the differences relating to price comparability with the country of export.”

The International Trade Policy Division of the Department of Finance has invited interested persons to submit representations concerning the proposed regulations by 4th August 2019, that is, within 15 days after the date of the publication of the notice (20 July 2019).

Tereposky & DeRose regularly provides advice on Canadian trade remedy matters, including anti-dumping and countervailing duty investigations and safeguard actions. Should you have any questions regarding these new procedures, we are at your disposal.

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Vincent DeRose
613.237.8862
vderose@tradeisds.com

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com