3 Apr 2019

Canadian International Trade Tribunal Finds Safeguard Measures Warranted for 2 of 7 Classes of Steel Goods: Heavy Steel Plate and Stainless Steel Wire

On 3 April 2019 the Canadian International Trade Tribunal issued its awaited ruling in the steel safeguard inquiry.

The Tribunal was directed to conduct a safeguard inquiry concerning the importation into Canada of seven categories of steel products: (1) heavy steel plate, (2) concrete reinforcing bar, (3) energy tubular products; (4) hot-rolled sheet, (5) pre-painted steel, (6) stainless steel wire, and (7) wire rod.

It determined that safeguard measures were warranted for the following two steel product categories:

  • Heavy steel plate (other than goods originating in Korea, Panama, Peru, Colombia and Honduras); and
  • Stainless steel wire (other than goods originating in Korea, Panama, Peru, Colombia and Honduras).

For these two categories, the Tribunal recommended a remedy in the form of a tariff rate quota (TRQ) on imports from subject countries “other than goods originating in Korea, Panama, Peru, Colombia, Honduras, or countries whose goods are eligible for GPT treatment”. Importantly, the Tribunal recommended “that the Governor in Council consider a different method of allocating the in-quota volume than the first-come first-served basis used for the provisional safeguard measure”, based on evidence that this “method of quota allocation has been disruptive to the marketplace and created significant uncertainty”.

With respect to the other five product categories, the Tribunal determined that the steel goods are either (i) not being imported in such increased quantities as to cause or threaten to cause serious injury to the domestic industry, or (ii) notwithstanding the existence of a significant increase in imports, the increase is neither causing nor threatening to cause serious injury or threat thereof. Accordingly, the Tribunal concluded that safeguard measures are not warranted for:

  • Concrete reinforcing bar;
  • Energy tubular products;
  • Hot-rolled sheet;
  • Pre-painted steel; and
  • Wire rod.

The Tribunal’s report will now be considered by the Minister of Finance and Cabinet, who have only have a few weeks before the provisional duties expire to decide whether to impose “definitive” long-term safeguard measures (i.e., for a period of three years) on heavy steel plate and stainless steel wire and, if so, how such measures should be implemented.

For the five product categories for which the Tribunal found that safeguard measures at not warranted, it is reasonable to expect that (i) the provisional safeguard measures will be discontinued, and (ii) a process will be established for the prompt refund of import surtaxes that have been paid by importers during the provisional period.

The basis in Canadian law for such a refund is section 58 of the Customs Tariff, which provides as follows: “For the purpose of carrying out Article 6 of the Agreement on Safeguards in Annex 1A of the World Trade Organization Agreement, the Governor in Council may, on the recommendation of the Minister [of Finance], by order, refund any surtaxes imposed under an order made under subsection 55(1) on the basis of a report made by the Minister [of Finance]”. (The Order Imposing a Surtax on the Importation of Certain Steel Goods was made under subsection 55(1) of the Customs Tariff.)

The relevant part of Article 6 of the WTO Agreement on Safeguards (as referenced above) provides that provisional safeguard measures “should take the form of tariff increases to be promptly refunded if the subsequent investigation … does not determine that increased imports have caused or threatened to cause serious injury to a domestic industry”.

Thus, in order to ensure compliance with Canada’s WTO obligations, the Governor in Council must make an Order in Council to establish the refund process pursuant to section 58 of the Customs Tariff. It remains to be seen whether importers will be paid interest on the amounts they are refunded in the same way that importers are paid interest on refunds of provisional anti-dumping and countervailing duties under subsection 66(3) of the Customs Act and subsection 8(2) of the Special Import Measures Act.

Tereposky & DeRose regularly provides advice on Canadian trade matters, including safeguard actions. Should you have any questions regarding this matter, 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