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International Trade - Dumping
MORE CASES
Part 2
. Canadian Hardwood Plywood and Veneer Association v. Canada (Attorney General)
In Canadian Hardwood Plywood and Veneer Association v. Canada (Attorney General) (Fed CA, 2023) the Federal Court of Appeal considered a JR [under s.96.1 of the Special Imports Measures Act] of a CITT dumping ruling. The CITT found dumping but that it "did not cause injury and (was) not threatening to cause injury to the domestic industry, pursuant to subsection 43(1) of the SIMA".
In these quotes the court considered the test for any 'injury' causing by the dumping, starting with the CITT's analysis and then moving to it's own:A. Did the Tribunal apply an unreasonable legal test when it conducted the past injury analysis?
(1) Tribunal Reasons regarding the determination of past injury
[19] First, in order to determine whether the dumping and subsidizing of the subject goods had caused or were threatening to cause injury to the domestic industry, the Tribunal determined which domestically produced goods constituted like goods, as defined under subsection 2(1) of the SIMA.
[20] The Tribunal also assessed whether there was, within the subject goods and the like goods, more than one class of goods. The Tribunal agreed with the complainants (the applicants here) and the respondent importers that there was a single class of goods, which included: (1) decorative and other non-structural plywood; and (2) veneer core platforms for the production of decorative and other non-structural plywood. The Tribunal determined that “domestically produced goods of the same description were ‘like goods’ in relation to the subject goods” (Tribunal Reasons at para. 69). The Tribunal found that there was no evidence of a dividing line that would clearly separate two classes of goods. Rather, the goods “appear[ed] to fall at various points along a continuum within a single class of goods” (Tribunal Reasons at para. 74).
[21] Next, the Tribunal set out an overview of the Canadian decorative and other non-structural plywood market and considered the arguments that the domestic industry was already being injured by the dumping and subsidizing of the subject goods in 2017, at the beginning of the POI [SS: "POI" = period of inquiry] (Tribunal Reasons at paras. 90–95). This analysis of the CITT's ruling continues at paras 22-43.
Then the court states it's own analysis:(3) Analysis
[49] The factors that may be considered by the Tribunal when it undertakes an injury analysis are found in subsections 37.1(1) and 37.1(3) of the SIMR. These subsections are reproduced as an Appendix to these reasons.
[50] While compelling, there are several reasons why I cannot agree with applicants’ arguments, having regard to the standard of review of reasonableness and the deference that is owed to the Tribunal in these matters.
[51] First, I will consider the POI. It was reasonable for the Tribunal to limit its inquiry to the three-year POI it set.
[52] The Tribunal set the POI for its inquiry from January 1, 2017, to June 30, 2020. That is the starting point. A determination that dumping or subsidizing has caused material injury must be based on injurious effects that crystalized during the POI. The Tribunal could not find that injury to the domestic industry allegedly suffered prior to the POI was caused by the subject goods and then extrapolate from there. There was no evidence before the Tribunal to make such a finding.
[53] Indeed, at this stage, when the Tribunal’s role is to determine whether the dumping or subsidizing of the subject goods (as found by the CBSA) caused material injury, the timing of the analysis is already set. The Tribunal cannot examine a POI set much earlier than the one used by the CBSA, since there was no finding that the subject goods were dumped or subsidized at that time (as noted in the Tribunal Reasons at paragraph 101). For the same reason, the Tribunal cannot set a much longer POI starting several years before the start of the period of investigation considered by the CBSA.
[54] As mentioned, when a Tribunal makes a finding of injury, it must find that the injury was caused by the dumping and subsidizing of the subject goods during the POI (see Nitisinone Capsules (5 December 2018), PI-2018-006 (CITT) at paras. 42–43 and Liquid Dielectric Transformers (9 July 2012), PI-2012-001 (CITT) at para. 32 [Liquid Dielectric Transformers]). In its previous decisions, the Tribunal concluded that “[a] determination that dumping ‘has caused’ material injury must, by definition, be based on injurious effects that crystalized (i.e. became manifest) during the POI”, although foreseeably imminent injury could arguably “support a determination that the dumping is threatening to cause material injury” (Liquid Dielectric Transformers at para. 32) [italics in original, underline added]. It was reasonable for the Tribunal to rely on its previous decisions which held that the injury must be caused by the dumping and subsidizing of the subject goods during the POI. Furthermore, the Tribunal’s Finding here is within a range of reasonable outcomes.
[55] Next, I cannot accept the arguments that the Tribunal required the domestic industry to demonstrate that the injury was increasing or intensifying during the POI. A careful reading of the Tribunal Reasons does not lead me to such a conclusion. The applicants do not reference any portion of the Tribunal Reasons that suggests this. To the contrary, the Tribunal based its decision in part on an assessment of “changes in the volume of the goods, their effect on the price of like goods, and their resulting impact on the state of the domestic industry, during the POI” (Tribunal Reasons at para. 103).
[56] Turning to the factors set out in section 37.1 of the SIMR, I note that the language of subsections 37.1(1) and 37.1(3) of the SIMR indicates that the Tribunal has great flexibility in how it analyzes the factors therein (note the use of the words “may be considered”). The fact that the Tribunal gave greater weight to some factors rather than others would not, in itself, render its decision unreasonable.
[57] Nothing in the SIMR precludes the Tribunal from examining trends, even in the context of factors where the SIMR does not explicitly require looking at trends. This is consistent with the fact that several of the factors listed in subsections 37.1(1) and 37.1(3) of the SIMR depend on an assessment of trends.
[58] In any event, it cannot be said that the Tribunal’s decision relied exclusively on factors that depended on trends or changes during the POI. The Tribunal specifically examined the factors from paragraphs 37.1(1)(a)–(c) of the SIMR when it conducted its injury analysis and did not rely solely on factors that required a deteriorating trend (Tribunal Reasons at paras. 106–78).
[59] For example, the Tribunal analyzed factors on price undercutting at paragraphs 115–37 of the Tribunal Reasons, analyzed “other performance indicators” at paragraphs 169–76 of the Tribunal Reasons, and analyzed the magnitude of the margin of dumping and amount of subsidy at paragraph 177 of the Tribunal Reasons. These factors do not require an assessment of deteriorating trends.
[60] When considering the question of price undercutting, the Tribunal found “the subject goods consistently undercut the domestically produced like goods throughout the POI” (Tribunal Reasons at para. 117). This conclusion was not based on any upward or downward trend in the data.
[61] The Tribunal also examined other factors that were not based on trends, in particular the fact that significant investments have been put of hold or delayed (Tribunal Reasons at para. 173) and the fact two domestic producers closed their operations or declared bankruptcy (Tribunal Reasons at paras. 174–76).
[62] As can be seen, the Tribunal’s determination of whether the dumping or subsidizing of the subject goods caused material injury did not rely exclusively on factors that depended on trends.
[63] What the applicants take issue with here is that the Tribunal placed less weight on factors not requiring an assessment of trends. It is the Tribunal’s role to weigh the factors when it determines whether the dumping and subsidizing caused injury and not for this Court to second-guess the Tribunal’s factual findings. The Tribunal’s Finding is not unreasonable on that basis.
[64] I will now address the argument that, by examining the domestic industry’s net income, a causal link between the subject goods and the like goods is established. Paragraph 42(1)(a) of the SIMA and section 37.1 of the SIMR preclude the Tribunal from finding that the mere presence of subject goods automatically caused injury to the domestic industry. The Tribunal must be satisfied, on the basis of its analysis, that it is the subject goods, and not other factors, that have caused the injury. The Tribunal did so here when it analyzed the evidence as it related to the factors set out in section 37.1 of the SIMR.
[65] The Tribunal examined the domestic industry’s financial performance at paragraphs 165–68 of the Tribunal Reasons. When considering the factors set out in section 37.1 of the SIMR, I cannot accept that the Tribunal should have relied on net income rather than gross income when examining the domestic industry’s financial performance.
[66] The text of subsections 37.1(1) and 37.1(3) of the SIMR do not require the Tribunal to examine the domestic industry’s net income. Not only do these subsections not require the Tribunal to examine or place any particular weight on any factor (through the use of the wording “may be considered”), but they also do not mention the terms “net income”.
[67] In sum, in my view, it was reasonable for the Tribunal to conclude, based on the evidentiary record before it, that dumping or subsidizing of the subject goods did not cause injury to the domestic industry. Overall, it seems that the applicants are taking issue with the weighing of the evidence as it relates to the factors set out in section 37.1 of the SIMR. They are essentially asking this Court to reweigh the evidence, prefer certain evidence that was before the Tribunal, and arrive at a different conclusion. That is not our role on judicial review. As mentioned, the Tribunal has a special expertise and, in light of this, we must show deference. Absent exceptional circumstances, this Court should not interfere with the decision maker’s factual findings (Vavilov at para. 125). There are no such exceptional circumstances here. . Canadian Hardwood Plywood and Veneer Association v. Canada (Attorney General)
In Canadian Hardwood Plywood and Veneer Association v. Canada (Attorney General) (Fed CA, 2023) the Federal Court of Appeal considered a statutory federal judicial review under s.96.1 of the Special Import Measures Act (SIMA). In these quotes the court canvasses some of the SIMA regime, particularly relating to the 'dumping' of goods on the market:II. The SIMA and the SIMA Handbook
[12] Before turning to the Final Determination and the Statement of Reasons, it is helpful to review certain provisions of the SIMA, policies and procedures set out in the SIMA Handbook, as well as certain industry practices relevant to the issues raised in this judicial review. While some of these provisions are not at issue here, they are important to underscore in order to appreciate the complexity encountered by the President of the CBSA when faced with determining the normal value of goods and determining whether a PMS exists.
[13] The relevant provisions of the SIMA and of the Special Import Measures Regulations, S.O.R./84-927 (SIMR) are reproduced as Annexes A and B to these reasons.
[14] The President of the CBSA, on his own initiative or upon receipt of a complaint, must initiate an investigation into whether certain goods are being dumped or subsidized into Canada if he is of the opinion that there is evidence that the goods have been dumped or subsidized and that there is a reasonable indication that the dumping or subsidizing has caused injury or retardation or is threatening to cause injury (SIMA, s. 31(1)). In this judicial review, the CBSA’s investigation was initiated following a complaint filed by the applicants.
[15] The terms "“dumped”", "“insignificant”" and "“margin of dumping”" are all defined in subsection 2(1) of the SIMA as follows:"“Dumped”" means that the normal value of the goods exceeds the export price of the goods.
"“Insignificant”", in relation to a margin of dumping, means a margin of dumping that is less than two per cent (2%) of the export price of the goods.
"“Margin of dumping”" means, subject to sections 30.2 and 30.3 of the SIMA, the amount by which the normal value of the goods exceeds the export price of the goods. [16] Therefore, dumping occurs when the normal value of goods is greater than the export price of the goods. The margin of dumping represents the amount by which the normal value exceeds the export price. It is either zero or the amount determined by subtracting the weighted average export price of the goods from the weighted average normal value of the goods, whichever is greater (SIMA, s. 30.2(1)). To determine if the dumping is insignificant, the CBSA converts the margin of dumping into a percentage of the export price. Dumping becomes significant when the margin of dumping is 2% or more of the export price of the goods.
[17] Determining the normal value of goods is critical because the normal value is the benchmark against which the price of the exported goods is compared to determine if the exported goods are being dumped.
[18] To obtain the information required to establish the normal value of goods during an investigation, the CBSA issues RFIs to the entity in the foreign country that is producing and/or exporting the goods to Canada. The CBSA can also issue RFIs to the country of export and to importers.
[19] The current practice is for RFI responses to be filed electronically with key sales and costing data set out in Microsoft Excel spreadsheets. As part of the RFI, the exporter is required to complete several key appendices, which include: (1) detailed information on every sale of the goods under investigation that were exported to Canada during a specified period (the period of investigation); (2) details on every sale of the goods under investigation in the exporter’s home market during the period of investigation; and (3) details on the production and selling costs of the goods reported in the first two appendices (Applicants’ Public Record, Vol. 2, Tab F, p. 204 at paras. 47−48).
[20] The information obtained from the RFIs is shared with the applicants.
[21] The CBSA can also choose to attend at the offices of the entity in the foreign country that is producing and/or exporting the goods to Canada (SIMA Handbook, s. 4.5.6). As the dumping investigation at issue in this proceeding was conducted during the COVID-19 pandemic, no such attendance occurred. The CBSA relies on the information obtained from responses to the RFIs and the site visits to calculate the margin of dumping (SIMA Handbook, s. 4.4.5.3). The methodology for calculating dumping margins is encompassed within the SIMA and the SIMR.
A. The calculation of normal values
(1) Section 15 and subsection 16(1) of the SIMA
[22] The SIMA sets out different methodologies to calculate normal values. The starting point is the methodology for calculating normal values outlined at section 15 of the SIMA, which requires examining the price at which the goods are sold in the country of export. The determination of the normal value of goods under section 15 is subject to the rules set out in section 16 of the SIMA.
[23] In the review before us, the President of the CBSA found that he could not determine the normal values in accordance with section 15 as there were an insufficient number of sales of like goods that complied with all the terms and conditions referred to in section 15 and subsection 16(1) so as to permit a proper comparison with the sales of the goods to the importer in Canada.
(2) Paragraph 16(2)(c) of the SIMA
[24] When, in the opinion of the President, a PMS exists in respect of any goods of a particular exporter or of a particular country "“which does not permit a proper comparison with the sale of the goods to the importer in Canada”", paragraph 16(2)(c) of the SIMA prohibits the CBSA from using domestic sales as the basis for normal values. Depending on the circumstances at play, the CBSA will refer to sections 19 or 29 of the SIMA to calculate normal values: (SIMA, ss. 16(2)(c), 16(2.1); SIMR, ss. 11.2(2)).
[25] The SIMA Handbook explains that the President of the CBSA may form an opinion that a PMS exists if one or more of the following factors have had a significant impact on the domestic sale of like goods in the country of export:Ÿ Government regulations such as price floors, price ceilings, production quotas, import and export controls;
Ÿ Taxation policies;
Ÿ Government support programs (financial or otherwise);
Ÿ The presence and activities of state-owned or state-controlled enterprises in the domestic market as suppliers or purchasers of the like goods (also including other state-owned or state-controlled enterprises such as financial institutions);
Ÿ The acquisition of production inputs or processing services that do not reflect market-based costs because they are acquired from suppliers which are state-owned or state-controlled or are affected by government influence or control;
Ÿ Significant volatility in economic conditions in the home market of the exporter;
Ÿ Evidence of distorted input costs; and
Ÿ Any other circumstances which may or may not be the result of government intervention, in which normal market conditions or patterns of supply and demand do not prevail.
(SIMA Handbook, s. 5.2.2.9) (3) Section 19 of the SIMA
[26] Section 19 offers the President of the CBSA the option of two methodologies, which can be used when the CBSA cannot calculate the margin of dumping for an exporter pursuant to section 15 of the SIMA. Under paragraph 19(a), the price at which the exporter sold like goods to customers in a country other than Canada is used to calculate the normal value. Under paragraph 19(b), the normal value is constructed by aggregating the cost of production of the goods, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits. Further details for calculating these amounts are set out in sections 11, 11.2, 12, 13 and 13.1 of the SIMR.
[27] The CBSA calculates the margin of dumping on the basis of the information it receives from the exporters through the RFIs, from the applicants and, if it deems necessary, from its own investigation.
[28] Where a PMS is found to exist, such that the acquisition cost of a particular input does not reasonably reflect the actual cost of that input, subsection 11.2(2) of the SIMR sets out alternative benchmarks for the calculation of cost inputs to be used in the cost production. Under subsection 11.2(2), the acquisition cost of the input used in the production of goods shall be considered to be one of five possible amounts that reasonably reflects the actual cost of the input so as to permit a proper comparison.
[29] A finding that a PMS exists has broad implications on the dumping investigation. Such a finding may change the methodology with which the cost inputs of the goods are determined, which in turn impacts the calculation of the normal value of the goods, which then impacts the calculation of the margin of dumping. Since a margin of dumping of 2% or more of the export cost is considered not to be insignificant, small changes to the cost inputs can easily increase the margin of dumping above this threshold.
[30] In the review before us, the President of the CBSA found that a PMS did not exist, and determined the normal values of the goods for the Zero-Rated respondents who provided satisfactory data about the costs of production pursuant to paragraph 19(b) of the SIMA.
(4) Section 20 of the SIMA
[31] The third methodology used to calculate normal values is set out at section 20 of the SIMA and is specific to non-market economies. It is not relevant in this proceeding.
(5) Subsection 29(1) of the SIMA
[32] The final methodology used to calculate normal values is applicable where, in the opinion of the President of the CBSA, the information is unavailable or insufficient to allow for a determination under one of the other methodologies. Normal values are then determined by ministerial specification, pursuant to subsection 29(1) of the SIMA. This methodology aims to limit the advantage an exporter can get by not cooperating with the investigation. It is punitive in nature.
[33] In the review before us, the President of the CBSA determined the normal values of goods pursuant to subsection 29(1) of the SIMA with respect to all goods exported where no information was supplied in respect of the cost of production.
B. Final determination under section 41 of the SIMA
[34] Within 90 days of making a preliminary determination on the dumping investigation, the President of the CBSA must make a final determination pursuant to section 41 of the SIMA. In particular, the President of the CBSA must either:i. Terminate its dumping investigation against any exporter that is not dumping or whose margin of dumping is "“insignificant”" (SIMA, s. 41(1)(a)); or
ii. Make a final determination of dumping against all other exporters and specify the margin of dumping (SIMA, s. 41(1)(b)). [35] In the present case, the President of the CBSA terminated the dumping investigation with respect to the Zero-Rated respondents pursuant to paragraph 41(1)(a) of the SIMA.
[36] As is evident from this brief review of the statutory framework and policies, the determination of the normal values used to calculate the margin of dumping in order to arrive at a decision under section 41 of the SIMA is not an easy task. It obliges the CBSA to sift through voluminous information and undertake a complex selection and adjustment of information to use as cost inputs in order to complete the required mathematical exercise. All of this must be accomplished within a short timeframe. This determination is sensitive to the inputs; the export price being merely 2% lower than the normal value would constitute dumping.
....
(5) Determination
[133] In sum, this Court has described the nature of dumping and subsidy investigations as a process that is "“complex and technical and requires specialized analysis and calculations of commercial data”" and is "“essentially a fact-finding economic mission in an international trade context”" (Uniboard at para. 28). Similarly, as is evident from the passages cited at paragraphs 90 and 91 above from WTO-Australia, the consideration of a potential PMS is a highly contextual assessment. This factually intensive assessment is conducted under a complex technical framework and under strict statutory timelines.
[134] The President of the CBSA assessed each factor, considered all of the available evidence and explained why he did not form an opinion that a PMS existed in China. His conclusion was the result of a highly discretionary and fact-based assessment that falls within his expertise. In conducting a reasonableness review, I am cognizant that this Court must be attentive to the application by the President of his specialized knowledge and expertise (Vavilov at para. 93).
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