Order Fixing the Day after the Day on which this Order is made as the Day on which Certain Provisions of the Act Come into Force: SI/2018-38

Canada Gazette, Part II, Volume 152, Number 10

Registration

May 16, 2018

BUDGET IMPLEMENTATION ACT, 2017, NO. 1

Order Fixing the Day after the Day on which this Order is made as the Day on which Certain Provisions of the Act Come into Force

P.C. 2018-458 April 25, 2018

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 102 of the Budget Implementation Act, 2017, No. 1, chapter 20 of the Statutes of Canada, 2017, fixes the day after the day on which this Order is made as the day on which sections 68, 69, 74, 75 and 84 to 91, subsection 97(2) and sections 98 to 101 of that Act come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

Pursuant to section 102 of the Budget Implementation Act, 2017, No. 1, this Order fixes the day after the day on which this Order is made as the day on which sections 68, 69, 74, 75 and 84 to 91, subsection 97(2) and sections 98 to 101 of that Act come into force.

Objective

The objective of this Order is to bring into force certain provisions of the Budget Implementation Act, 2017, No. 1, which received royal assent on June 22, 2017, and amend the Special Import Measures Act (SIMA) to modernize and strengthen Canada’s trade remedy system.

Background

SIMA governs the conduct of anti-dumping and countervailing duty investigations in Canada, and is administered by the Canada Border Services Agency (CBSA) and the Canadian International Trade Tribunal in an independent, impartial and transparent manner. SIMA implements Canada’s obligations under the World Trade Organization (WTO) governing the imposition of anti-dumping and countervailing duty measures by members.

In recent years, concerns were raised by Canadian producers, most notably by the steel industry (who is also the most frequent user of the trade remedy system), that improvements were required to enhance the effectiveness of the trade remedy system. In particular, concerns were raised regarding the need to adopt additional mechanisms to ensure that dumped and unfairly subsidized imports do not enter the Canadian market without the appropriate payment of anti-dumping or countervailing duties, given the growing problem duty circumvention in global trade.

Through the Budget Implementation Act, 2017, No. 1, the Government of Canada amended SIMA to provide Canadian producers with a more rigorous response to unfair trade, improve the transparency of Canada’s trade remedy system and better align Canada’s trade remedy with those of the country’s major trading partners. The following amendments to SIMA were made in this regard:

• Anti-circumvention proceedings: After the imposition of anti-dumping or countervailing duties, foreign producers may attempt to circumvent duties by making slight modifications to, or changing the pattern of production of, exported goods such that the good no longer falls within the scope of goods on which duties apply.
  Circumvention undermines the effectiveness of the trade remedy system by allowing dumped and unfairly subsidized imports into the Canadian market without the proper assessment of duties. There was previously no mechanism allowing the CBSA to expand the scope of goods on which duties could be applied in order to capture importations of goods that circumvent anti-dumping and countervailing duties.
  SIMA has been amended to provide for new anti-circumvention investigations that would allow the CBSA to investigate allegations that anti-dumping and countervailing duties are being circumvented and, where warranted, to extend the scope of the duties to cover importations of goods that are circumventing existing duties.
• Scope proceedings: When enforcing anti-dumping and countervailing duties, the CBSA determines whether imported goods are subject to duties on the basis of the product’s description and the country of origin (i.e. whether they are within the scope of the duties). In addition, prior to importation, exporters and importers can request that the CBSA provide informal advice as to whether a particular shipment would likely be subject to duties upon importation.
  However, determinations made upon importation were not public, and other interested parties (e.g. domestic producers) had no way to express views or challenge decisions with which they may have disagreed. Moreover, this information advice was non-binding (i.e. the CBSA could make a different determination following the actual importation of the goods).
  The CBSA’s opinion on whether or not a good is subject to duties could have a material impact on the protection afforded to domestic producers by anti-dumping and countervailing duties. The amendments to SIMA provide greater transparency and opportunities for domestic producers to participate in this process in two ways:
  • (1) A new formal proceeding was created to allow interested parties, including domestic producers, to request a ruling from the CBSA as to whether a particular product is subject to anti-dumping and countervailing duties (i.e. whether it is within the scope of the duties). Unlike previous informal advice provided by the CBSA on scope, the scope proceedings will allow other interested parties to provide their views, and these rulings will be public and binding on the CBSA with respect to future importations of the same product models.
  • (2) Second, interested parties will have the right to appeal re-determinations, made at the second level of review, by the CBSA on whether a product that has already been imported is or is not within the scope of the duties.

  These measures will provide domestic producers with due process rights to fully defend their interests.

• Addressing price distortions: In anti-dumping investigations, dumping margins are normally calculated by comparing the prices of the goods when sold in the domestic market of the exporting country with the prices of goods when sold for export to Canada. However, alternative methodologies could be appropriate for calculating dumping margins if domestic prices in the exporting country do not allow for a proper comparison (i.e. they are distorted). This may arise because of the presence of a “particular market situation,” such as where government intervention results in price distortion. Previously, there was no flexibility in SIMA for the CBSA to disregard prices in the domestic market of the exporting country because of price distortions in that market.
  The amendments to SIMA provide the CBSA with the ability to use alternative methodologies when calculating margins of dumping in situations where price distortions in the country of export render those prices unreliable. That is, instead of using the selling prices of the goods in the domestic market of the exporting country, the CBSA may determine prices charged in the exporting market by calculating the cost to produce the good, and adding reasonable amounts for selling, general and administration costs and profit.

Implications

This Order brings into force legislative provisions establishing two new enforcement proceedings (i.e. scope and anti-circumvention) that will allow the CBSA to better enforce trade remedy measures and provide it with new tools to address price distortions in the domestic market of an exporting country in anti-dumping investigations. These provisions support the modernization and strengthening of Canada’s trade remedy system in order to provide Canadian producers with a more rigorous response to unfair trade.

Trade remedy measures are intended to address the injury to domestic producers caused by unfair trade. However, the measures can be undermined when exporters or importers seek to avoid the duties. The establishment of two new enforcement proceedings (i.e. scope and anti-circumvention) will allow the CBSA to better enforce trade remedy measures. In particular, the scope proceedings will allow interested parties to inform decisions made by the CBSA concerning whether certain goods are subject to anti-dumping or countervailing duties. The anti-circumvention investigations will allow domestic producers to request that the CBSA investigate whether certain goods are being imported for the specific purpose of circumventing existing duties and undermining the remedial effect of duties. If warranted, the scope of existing duties may be extended to address circumvention.

In addition, provisions concerning price distortions in the country of export will allow the CBSA to better account for the effects of particular market situations when it calculates margins of dumping.

These provisions were not brought into force upon royal assent of the Budget Implementation Act, 2017, No. 1, in order to allow for necessary, supporting regulatory amendments to the Special Import Measures Regulations (SIM Regulations) and the Canadian International Trade Tribunal Regulations (CITT Regulations) to be developed. The amendments to the SIM Regulations, CITT Regulations and SIMA come into force on the same day: the day after the day on which this Order is made.

Consultations

Public consultations were conducted by Finance Canada in 2016 on potential measures to strengthen Canada’s trade remedy system. The legislative changes that are being brought into force through this Order were informed by this consultation process and include measures that received the broad support from stakeholders.

The parliamentary process was an additional opportunity for stakeholders to express their views on these provisions. No objections were raised, and the amendments received strong support from the Canadian Steel Producers Association.

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