TABLE OF CONTENTS

INTRODUCTION

PROCEDURES UNDER SIMA

   A. Relevant Authorities

   B. Initiation of an Investigation

   C. Preliminary Determination of Dumping or Subsidization

   D. Calculating the Margin of Dumping and the Subsidy

      1. AD Investigation

      2. CVD Investigations

   E. Termination of an Investigation

   F. Final Investigation

   G. Final Determination by the DMR

   H. Determination of Injury by the CITT

   I. Findings by the CITT

   J. Review of Decisions

      1. Administrative Review

      2. Judicial Review by the Federal Court of Canada

      3. Review by a Panel under NAFTA

      4. Request by the Minister of Finance for Review

APPENDIX

The Special Import Measures Act(1) (SIMA) sets out the rules and procedures for anti-dumping (AD) and countervailing duty (CVD) actions under Canadian domestic law. The Act is designed to provide protection to Canadian producers who are being harmed or injured by the dumping or subsidizing of goods imported into Canada.

Enacted in 1984,(2) SIMA was to bring Canadian law into conformity with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade, more commonly known as the Anti-Dumping Code, and the Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and Trade, known as the Subsidies and Countervailing Duties Code. These codes were concluded during the 1979 Tokyo Round multilateral trade negotiations conducted under the auspices of the General Agreement on Tariffs and Trade (the "GATT").

Since its enactment, SIMA has been amended to bring it into conformity with Canada’s obligations under the Canada-United States Free Trade Agreement (FTA), the North American Free Trade Agreement (NAFTA) and, more recently, the World Trade Organization (WTO) agreements relating to anti-dumping(3) and subsidies.(4)

This paper will provide an overview of Canadian anti-dumping and countervailing duty law and procedure. (See Appendix for an outline of the SIMA process.)

The Deputy Minister of National Revenue (DMR) and the Canadian International Trade Tribunal (CITT)(5) are responsible for the administration of SIMA. The Anti-dumping and Countervailing Directorate of Revenue Canada conducts investigations and determines whether goods imported into Canada are dumped or subsidized. The CITT decides whether the dumped or subsidized goods have caused, or are threatening to cause, material injury to the production of like goods in Canada, or have caused retardation of the establishment of an industry in Canada.(6)

Most investigations under SIMA stem from complaints received from Canadian producers. To be considered, a complaint must be "properly documented." Within 21 days of the receipt of a complaint, the DMR must let a complainant know whether the documentation is in order.(7) If it is not, the DMR will ask the complainant for additional information.

Within 21 days of receipt of a properly documented complaint, the DMR will notify the complainant and the foreign government of the exporting country that a properly documented complaint has been received.(8)

Before the DMR will initiate an investigation, however, SIMA imposes other requirements. The first of these relates to the standing of a complainant. Two conditions must be met:

• the complaint must be supported by domestic producers whose collective production of the goods in question represents 25% or more of the total Canadian production of the goods; and

• the total production of those Canadian producers who express support for the complaint must be greater than the total production of those producers who express opposition.(9)

Moreover, the Canadian complainants must be producers of "like goods"; that is, goods that are identical to the foreign goods or that closely resemble the foreign goods in their uses and characteristics.

Finally, the complaint must contain evidence of a "reasonable indication" that dumping or subsidizing is causing injury.

Within 30 days after the date on which the complainant is informed that the complaint is properly documented, the DMR, if he or she believes that there is evidence that the imported products are dumped or subsidized and that there is a reasonable indication that injury or retardation has taken place or is threatening to do so, as a result, will initiate an investigation, provided that the complaint is supported by the industry.(10) This 30-day period can be extended to 45 days for the purpose of examining the level of support from Canadian producers.(11)

The DMR will not initiate an investigation where the complaint does not receive the minimum level of support required from Canadian producers, where there is insufficient evidence of dumping or subsidizing, or where the evidence does not disclose a reasonable indication of injury resulting from the alleged dumping or subsidizing. The DMR is required to give the complainant and the concerned foreign government written notice of any decision not to investigate.(12)

There is no appeal where such a decision by the DMR is based on the grounds that the complaint does not have sufficient industry support or that there is insufficient evidence of dumping or subsidizing.(13) If, however, the DMR decision is based on insufficient evidence of injury, the complainant or the DMR may refer the question of injury to the CITT.(14) If the CITT finds evidence of a reasonable indication of injury, the DMR will initiate an investigation.

When importers, exporters and foreign governments are notified of the DMR’s decision to initiate an investigation, they have 30 days within which to request that the CITT review the evidence of injury. The DMR can also ask the CITT for an opinion on this matter.(15) Within 30 days of the date of such requests, the CITT must render its decision. If the CITT concludes that there is not a reasonable indication of injury, the investigation is terminated.(16) A finding of injury results in a continuation of the investigation.(17)

SIMA also authorizes the DMR to initiate an investigation on his or her own initiative, but this power is seldom used.(18)

Within 90 days after an investigation has been initiated, the DMR must make a preliminary determination as to dumping or subsidizing and whether there is a reasonable indication that the dumped or subsidized goods are causing injury to Canadian production.(19) The 90-day period can be extended for a further period of up to 45 days because of:

• the complexity or novelty of the issues involved in the investigation;

• the variety of goods or the number of persons involved;

• the difficulty of obtaining satisfactory evidence; or

• any other circumstances that make it unusually difficult to make a decision.(20)

A preliminary determination will be made by the DMR where the evidence indicates dumping or subsidizing and where the DMR concludes that the there is a reasonable indication that the dumping or subsidizing has caused injury. When a preliminary determination is made, the DMR:

• estimates the margin of dumping or the amount of subsidy for each exporter of the goods;

• specifies and describes the goods to which the determination applies;

• where the subsidy is in whole or in part a prohibited subsidy, estimates the amount that is a prohibited subsidy; and

• informs the CITT of the preliminary results of the investigation so that it may begin its inquiry into whether injury is being caused.(21)

The DMR can impose provisional duties on goods in respect of which a preliminary determination has been made. In dumping cases, the DMR may accept written undertakings from foreign exporters to increase the selling price of goods exported to Canada. In cases where subsidization has been found, undertakings from foreign governments to limit or eliminate a subsidy may also be accepted.

SIMA provides for two types of undertakings in dumping cases:

• an undertaking by an exporter to increase the selling price of goods to importers in Canada by an amount sufficient to eliminate the injury to Canadian production; and

• an undertaking by an exporter to increase the selling price of goods to importers in Canada by an amount sufficient to eliminate dumping.

SIMA also provides for several other types of undertakings in subsidy investigations, including:

• an undertaking by an exporter to increase the selling price of goods to importers in Canada in order to offset the subsidy; and

• an undertaking by a foreign government to take action to eliminate injury caused by a subsidy. The undertaking could eliminate the subsidy on goods exported to Canada, limit the amount of the subsidy, limit the quantity of subsidized goods shipped to Canada, or otherwise eliminate the injurious effects of the subsidizing on Canadian production.(22)

Generally, goods are considered to be dumped if their export price is less than the price in their domestic market or less than their total cost. The foreign producer’s domestic selling price is referred to as the "normal value" of the goods. Therefore, goods are considered to be dumped if their normal value exceeds their export price.(23) The margin of dumping is the amount by which the normal value exceeds the export price.

SIMA sets out certain rules with respect to normal value, which can be determined in the following ways:

• the price at which the goods in question are sold in their domestic market (domestic sales price);

• the price charged for the goods in countries other than Canada (third-country sales price); and

• the constructed value, which is the aggregate of the cost of production, an amount for selling, administrative and other costs, and a reasonable amount for profit.(24)

In a countervailing duty investigation, the DMR must determine whether the goods that are the subject of a complaint have received a countervailable subsidy.

SIMA defines a "subsidy" as:

• a financial contribution by a government of a country other than Canada that confers a benefit to persons engaged in the production, manufacture, growth, processing, purchase, distribution, transportation, sale, export, or import of goods; or

• an income or price support within the meaning of Article XVI of the GATT, 1994.(25)

Section 2(1.6) of SIMA, which implements Article 1.1 of the WTO Subsidies Agreement, provides that a financial contribution by a government exists where:

• practices of the government involve the direct transfer of funds or liabilities or the contingent transfer of funds or liabilities;

• amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected;

• the government provides goods or services, other than general government infrastructure, or purchases goods; or

• the government directs or permits a non-governmental body to do any of the above and the manner in which that body carries out the undertaking is not meaningfully different from the way in which the government would do it.

According to the WTO Subsidies Agreement, a subsidy will be countervailable if it is specific. SIMA provides that a subsidy is not specific if the criteria or conditions governing eligibility for, and the amount of, the subsidy are:

• objective;

• set out in a legislative, regulatory or administrative instrument or other public document; and

• applied in a manner that does not favour or is not limited to a particular enterprise.(26)

SIMA sets out criteria for both de jure and de facto specificity. Under section 2(7.2), a subsidy is de jure specific if it is: limited to a particular enterprise within the jurisdiction of the authority, or is a "prohibited subsidy." A prohibited subsidy is defined as an export subsidy or a subsidy that is contingent on the use of goods that are produced or originate in the country of export.

Even though a subsidy may not be directed to a particular enterprise, the DMR can determine that a subsidy is in fact specific (de facto) by considering whether:

• there is exclusive use of the subsidy by a limited number of enterprises;

• there is predominant use of the subsidy by a particular enterprise;

• disproportionately large amounts of the subsidy are granted to a limited number of enterprises; and

• the manner in which discretion is exercised by the granting authority indicates that the subsidy is not generally available.(27)

The WTO Subsidies Agreement refers to non-actionable subsidies. These are subsidies that are not specific, and subsidies that may be specific but which meet certain conditions set out in Article 8.2 of the Agreement. SIMA adopts the concept of non-actionable subsidy and, among other things, defines it as:

• a subsidy that is not specific; or

• a subsidy for industrial research assistance, pre-competitive development assistance, assistance to disadvantaged regions, assistance for the adaptation of existing facilities to new environmental standards, or assistance for research activities conducted by institutions of higher education and independent research establishments that meet prescribed criteria.(28)

If a countervailable subsidy is found, then the amount of the subsidy is determined according to criteria in the Special Import Measures Regulations.(29)

Where there is insufficient evidence of dumping or subsidizing, or the margin of dumping or the amount of subsidy is insignificant,(30) or the actual or potential volume of dumped or subsidized goods is negligible,(31) or there is not a reasonable indication of injury as a result of dumping or subsidizing, the DMR will terminate an investigation.(32)

There is no appeal of a decision of the DMR to terminate an investigation because of a finding of no dumping or subsidizing or an insignificant margin of dumping or amount of subsidy.(33) Where the DMR concludes that the evidence does not disclose a reasonable indication that the dumping or subsidizing of the goods has caused injury to Canadian production, however, any interested party may refer the injury question to the CITT within 30 days.(34) Otherwise, the investigation is terminated. If a referral is made and the CITT determines that there is a reasonable indication of injury, the DMR will make a preliminary determination of dumping or subsidizing and continue the investigation.(35)

Except where an investigation is suspended because of the acceptance of undertakings, SIMA requires the DMR to make a final determination of dumping or subsidizing within 90 days after a preliminary determination.(36)

If, during the course of a final investigation, it is determined that the information and evidence show that there is no dumping or subsidizing, that the margin of dumping or the amount of subsidy is insignificant, or that the volume of dumped or subsidized goods is negligible, the DMR will terminate the investigation. However, the DMR cannot terminate the investigation on the grounds that there is insufficient evidence of injury of dumped or subsidized goods. Once the DMR has made a preliminary determination, the CITT commences an injury inquiry.(37)

If it is established that the goods are dumped or subsidized, that the margin of dumping or the amount of the subsidy is not insignificant, and that the actual or potential volume is not negligible, a final determination is made. These results are given to the CITT for consideration in its inquiry into injury.

The Canadian International Trade Tribunal is an independent, quasi-judicial body which, among other things, conducts inquiries into whether dumped or subsidized imports are causing injury or retardation to Canadian production, or is threatening to do so.

SIMA defines injury as material injury to a domestic industry.(38) It also provides that there can be no finding of threat of injury unless the circumstances in which the dumping or subsidization of goods would cause injury are clearly foreseen and imminent.(39)

Within 120 days after receiving notice of the DMR’s preliminary determination, the CITT must conduct and complete its inquiry and issue a decision as to whether the dumping or subsidizing of goods has caused injury or retardation or is threatening to cause injury to the production in Canada of like goods. The CITT has an additional 15 days to issue a statement of reasons supporting its findings.(40) As part of its inquiry, the CITT conducts a formal hearing at which witnesses are heard, evidence is presented and submissions are received.

The Special Import Measures Regulations specify a number of factors relevant to a determination as to whether the dumping or subsidizing of any goods has caused injury or retardation. These include:

• the volume of the dumped or subsidized goods, particularly whether there has been a significant increase in the volume of such goods;

• the effect of the dumped or subsidized goods on prices, particularly whether the goods have significantly undercut, depressed or suppressed the prices of like goods; and

• the effect of the dumped or subsidized goods on the state of the domestic industry, including: (i) any actual or potential decline in output, sales, market share, profits, productivity, return on investments or the utilization of industrial capacity; (ii) negative effects on cash flow, inventories, employment, wages, growth or the ability to raise capital; (iii) the magnitude of the margin of dumping or the amount of the subsidy; and (iv) with respect to agricultural goods, any increased burden on government support programs.(41)

The Regulations also set out factors for the purpose of determining whether the dumping or subsidizing of goods is threatening to cause injury. These include:

• the nature of the subsidy in question and the effects it is likely to have on trade;

• whether there has been a significant rate of increase of dumped or subsidized goods imported into Canada, which indicates a likelihood of substantially increased imports of these goods;

• whether there is sufficient freely disposable capacity, or an imminent, substantial increase in the capacity of an exporter, that indicates a likelihood of a substantial increase of dumped or subsidized goods;

• the potential for product shifting where production facilities that can be used to produce the goods are currently being used to produce other goods;

• 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;

• inventories of the goods;

• the actual and potential negative effects on existing development and production efforts, including efforts to produce a derivative or more advanced version of the goods;

• the magnitude of the margin of dumping or amount of subsidy in respect of the dumped or subsidized goods; and

• any other relevant factors.(42)

The WTO Antidumping Agreement (Article 3.5) and the WTO Subsidies Agreement (Article 15.5) require that dumped or subsidized goods are causing injury "through the effects" of dumping or subsidizing. Thus, it is necessary to demonstrate a causal relationship between the dumping or subsidization and the injury.

The Special Import Measures Regulations prescribe the following factors for determining whether a causal relationship exists between the dumping or subsidizing and injury:

• the volumes and prices of imports of like goods that are not dumped or subsidized;

• a contraction in demand for the goods or like goods;

• changes in patterns of consumption of the goods or like goods;

• trade-restrictive practices of, and competition between, foreign and domestic producers;

• developments in technology;

• the export performance and productivity of the domestic industry in respect of like goods; and

• any other relevant factors.(43)

With respect to dumping or subsidizing, the CITT may make:

• a finding of no injury;

• a finding of injury; and

• a finding that there is no injury but there is a threat of injury.(44)

In situations involving goods of a NAFTA country, the CITT is required to make a separate finding or order in relation to those goods.(45)

A finding of no injury terminates all proceedings. Where the CITT does find injury, an anti-dumping or countervailing duty will be levied on goods imported from the date of the DMR’s preliminary determination to the date of the CITT’s finding and on all shipments thereafter. If the finding is one of threat of injury only, anti-dumping or countervailing duties will not be charged on goods released before the CITT’s finding.(46)

In some cases, the CITT may make an affirmative finding of injury but may consider that it would not be in the public interest either to impose an anti-dumping or countervailing duty or to impose the full amount of such a duty. The CITT must submit those opinions to the Minister of Finance, along with a statement of facts and reasons. Under section 45 of SIMA, interested persons are permitted to make representations to the CITT on this matter.

A number of avenues are available for obtaining a review of a decision of the DMR or the CITT. These include: administrative review by the CITT; judicial review by the Federal Court of Appeal; in the case of a NAFTA signatory, review by a NAFTA panel; and review upon the recommendation or ruling of a WTO dispute-settlement body.

SIMA provides that the CITT may review its findings of injury at any time on its own initiative or at the request of the DMR or any other person. Under subsection 76(5) of SIMA, a finding of the CITT will automatically lapse after five years unless a review has been undertaken. On completion of a review, the CITT can rescind a finding or continue it as is or subject to amendments.

Certain determinations of the DMR and the CITT may be appealed to the Federal Court of Appeal. An appeal may be sought on the grounds that the DMR or the CITT:

• acted without jurisdiction, acted beyond its jurisdiction or refused to exercise jurisdiction;

• failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;

• erred in law in making a decision;

• based a decision on an erroneous finding of fact that the DMR or the CITT made in a perverse or capricious manner or without regard for the material before it;

• acted or failed to act by reason of fraud or perjured evidence; or

• acted in a manner that was contrary to law.(47)

The Federal Court Act (48) provides that the Court may:

• order a federal tribunal to do any act or thing it has unlawfully failed or refused to do or has unreasonably delayed in doing; or

• declare invalid or unlawful, quash, set aside or set aside and refer back for re-determination in accordance with such directions as it considers appropriate, prohibit or restrain a decision, order or act, or proceeding of the federal tribunal.

Signatories of NAFTA can have "definitive decisions" of the DMR or the CITT reviewed by a panel under NAFTA rather than by the Federal Court of Appeal. These reviews are conducted pursuant to Chapter 19 of the NAFTA. The request can be made by the Canadian Minister of International Trade, the government of the NAFTA country whose goods are the subject of a decision, or any other person who would be entitled to apply under the Federal Court Act or section 96.1 of SIMA. (49) The grounds for review by a NAFTA panel are those set out in section 18.1(4) of the Federal Court Act.(50) Upon completion of the review, a panel is required to determine whether the grounds on which the review is requested have been established and make an order confirming the decision or remanding it back to the DMR or the CITT for reconsideration.(51)

In situations where a WTO Dispute Settlement Body issues a recommendation or a ruling, the Minister of Finance can ask the DMR to review any decision or determination made under SIMA. The Minister may also ask the CITT to review an AD or CVD order.(52) Upon completion of the review, the DMR or the CITT can continue the decision, or determination as is, continue it subject to amendment, or rescind it and make another.(53)

APPENDIX

Source:  Revenue Canada, Anti-Dumping and Countervailing Directorate, March 1996.

(1) R.S.C. 1985, c. S-15, as amended.

(2) SIMA revised and replaced the Anti-Dumping Act (R.S.C. 1970, c. A-15) and created the Canadian Import Tribunal which replaced the Anti-Dumping Tribunal.

(3) Agreement on Implementation of Article VI of GATT 1994.

(4) Agreement on Subsidies and Countervailing Measures.

(5) Canadian International Trade Tribunal Act, R.S.C. 1985, c. 47 (4th Supp.), as amended.

(6) Revenue Canada, Anti-Dumping and Countervailing Directorate, Statement of Administrative Practices for the Special Import Measures Act, March 1996, p. 1.

(7) Under s. 2(1) of SIMA, a complaint is properly documented when it alleges that: (i) the goods have been or are being dumped or subsidized, specifies the goods and alleges that the dumping or subsidizing has caused injury or retardation or is threatening to cause injury; (ii) states in reasonable detail the facts on which the allegations are based; (iii) contains representations that are relevant to the complaint; and (iv) the complainant provides information to prove the facts on which the allegations are based as well as any information prescribed by regulation under SIMA.

(8) SIMA, s. 32(1)(a).

(9) SIMA, s. 31(2).

(10) SIMA, s. 31(1), (2).

(11) SIMA, s. 31(6).

(12) SIMA, s. 33(1).

(13) Statement of Administrative Practices for the Special Import Measures Act, p. 5.

(14) SIMA, s. 33(2).

(15) SIMA, s. 34(1).

(16) SIMA, s. 36.

(17) SIMA, s. 34(2).

(18) SIMA, s. 31(1).

(19) SIMA, s. 38.

(20) SIMA, s. 39.

(21) SIMA, s. 38.

(22) Statement of Administrative Practices for the Special Import Measures Act, p. 15.

(23) Revenue Canada, Anti-Dumping and Countervailing Directorate, Complainant’s Questionnaire under the Special Import Measures Act, March 1996, p. 2.

(24) J. Christopher Thomas, Greg Tereposky and Kaz Fujihara, "Canadian Antidumping and Countervailing Duty Law and Procedure," in Beatriz Leycegui, William B.P. Robson, S. Dahlia Stein, eds., Trading Punches: Trade Remedy Law and Disputes under NAFTA, 1995, p. 83-84.

(25) SIMA, s. 2(1).

(26) SIMA, s. 2(7.1).

(27) SIMA, s. 2(7.3).

(28) SIMA, s. 2(1).

(29) Special Import Measures Regulations (SOR/84-927), as amended, s. 26.

(30) In accordance with the provisions of the WTO anti-dumping and subsidies agreements, which pertain to de minimus amounts for dumping margins and subsidies, SIMA defines the term "insignificant" to mean a margin of dumping that is less than 2% of the export price of the goods and an amount of subsidy that is less than 1% of the export price.

(31) "Negligible" with respect to the volume of dumped goods means less than 3% of the total volume of goods released into Canada from all countries and that are of the same description as the dumped goods. There is an exception to this 3% threshold if the total volume of dumped goods of three or more countries, each of whose exports of dumped goods into Canada are otherwise negligible, accounts for more than 7% of the total volume of goods. In this case, the volume of dumped goods of any of those countries is considered not negligible.

(32) SIMA, s. 35.

(33) Statement of Administrative Practices for the Special Import Measures Act, p. 11.

(34) SIMA, s. 35(2).

(35) Statement of Administrative Practices for the Special Import Measures Act, p. 11.

(36) SIMA, s. 41.

(37) Statement of Administrative Practices for the Special Import Measures Act, p. 19.

(38) SIMA, s. 2(1).

(39) SIMA, s. 2(1.5).

(40) SIMA, s. 43.

(41) Special Import Measures Regulations, s. 37.1(1).

(42) Ibid., s. 37.1(2).

(43) Ibid., s. 37.1(3).

(44) Statement of Administrative Practices for the Special Import Measures Act, p. 21.

(45) SIMA, s. 43(1.01).

(46) Statement of Administrative Practices for the Special Import Measures Act, p. 21-22.

(47) SIMA, s. 96(2).

(48) R.S.C. 1985, Chap. F-7, s. 18.1(3).

(49) SIMA, s. 77.011.

(50) Section 18.1(4) of the Federal Court Act provides the following grounds for review where a federal board, tribunal or commission: (i) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise jurisdiction; (ii) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe; (iii) erred in law in making a decision; (iv) based a decision on an erroneous finding of fact that the DMR or the CITT made in a perverse or capricious manner or without regard for the material before it; (v) acted or failed to act by reason of fraud or perjured evidence; or (vi) acted in a manner that was contrary to law.

(51) SIMA, s. 77.015.

(52) SIMA, s. 76.1.

(53) SIMA, s. 76.1(2).